Avoiding the credit card debt trap

For instance, in 2007-08, the value of credit card transactions in India stood at Rs.57,958 crore, up from Rs.41,361 crore in 2006-07 (Year-on-year rise of 40.12 percent).

But, in 2007-08, the total credit card outstanding rose 43.6 percent to Rs.5843 crore and, till May 23 this year, the outstanding shot up by 87 percent to Rs.12,375 crore.

And, coupled with the central bank's move of hiking the key interest rates to suck out excess liquidity from the market and curb credit growth, banks are passing on the buck to customers by charging higher interest rates.

But, those pay their dues on time are being spared, market analyst said.

But not everybody is a financial wizard and can manage to pay on time. According to Kalpana Srivastava of Amrit Financial Services, it is always bad financial planning to spend more than you bring in.

"But with credit cards it is a lot worse because of the fact that interest is charged and can seriously mount up in a very short space of time," Srivastava said.

In such a case, Srivastava said, the credit card user often finds himself in a position where he is not able to cover the monthly payment or feel that the pressure is growing.

"The sooner you admit to the bank you have a problem and seek advice, the more chances you have of being able to resolve the situation in a satisfactory manner. If you bury your head in the sand hoping that it will just go away you will be in big trouble sooner of later as this will antagonize the bank further," she said.

Umesh Kapur, managing director of Tirupati Investment Corp. agrees. For people who have trouble managing their credit cards, Kapur has several solutions.