Ritesh@kumar
KF Rookie
Rotating money between credit cards, also known as "credit card churning," can be a risky strategy. While it's not strictly illegal, it can lead to:
1. *Credit score damage*: Excessive credit utilization and frequent balance transfers can harm your credit score.
2. *Interest charges*: If you're not paying off the balances in full each month, you'll incur interest charges, increasing your debt.
3. *Fees*: Balance transfer fees, late payment fees, and other charges can add up quickly.
4. *Debt trap*: Revolving credit can lead to a debt trap, making it difficult to pay off the principal amounts.
Regarding income tax notices:
1. *Income tax scrutiny*: If the credit card companies report your transactions to the income tax department, you might receive a notice, especially if your expenses exceed your reported income.
2. *Unexplained income*: If the tax authorities suspect that you're using credit cards to fund unexplained expenses or income, you might face scrutiny.
To minimize risks:
1. *Pay off balances in full*: Avoid revolving credit to prevent interest charges and fees.
2. *Use credit cards responsibly*: Keep credit utilization below 30% and make timely payments.
3. *Report accurate income*: Ensure your reported income matches your expenses to avoid tax scrutiny.
4. *Seek professional advice*: Consult a financial advisor or tax expert to manage your debt and tax obligations.
Remember, credit cards should be used responsibly and not as a means to fund unsustainable expenses or lifestyles.
1. *Credit score damage*: Excessive credit utilization and frequent balance transfers can harm your credit score.
2. *Interest charges*: If you're not paying off the balances in full each month, you'll incur interest charges, increasing your debt.
3. *Fees*: Balance transfer fees, late payment fees, and other charges can add up quickly.
4. *Debt trap*: Revolving credit can lead to a debt trap, making it difficult to pay off the principal amounts.
Regarding income tax notices:
1. *Income tax scrutiny*: If the credit card companies report your transactions to the income tax department, you might receive a notice, especially if your expenses exceed your reported income.
2. *Unexplained income*: If the tax authorities suspect that you're using credit cards to fund unexplained expenses or income, you might face scrutiny.
To minimize risks:
1. *Pay off balances in full*: Avoid revolving credit to prevent interest charges and fees.
2. *Use credit cards responsibly*: Keep credit utilization below 30% and make timely payments.
3. *Report accurate income*: Ensure your reported income matches your expenses to avoid tax scrutiny.
4. *Seek professional advice*: Consult a financial advisor or tax expert to manage your debt and tax obligations.
Remember, credit cards should be used responsibly and not as a means to fund unsustainable expenses or lifestyles.
