The convenience of credit cards needs no repeated mentioning, but the dangers of credit card debt do require some attention, as it can act as a major reason for your financial ruin. Credit card debt is the most expensive debt that one can owe. At exorbitant rates of 30-40%, credit card debt is totally not worth it.
We at CreditMantri have always looked at ways to ease your journey through credit. Hence, we bring to you simple ways through which you can clear your credit card debt faster.
Pay Off the Debt with Highest Interest Rate First: All credit cards come with their terms and conditions and also with varying rates of interest. If you are dealing with debts pertaining to many credit cards, it is good to look for the ones with the highest rate of interest and clear them off first. This strategy helps if you are short of funds to pay off all debts together.
Consolidate Your Debt: If you have been landing into trouble with credit card debt due to missing dues dates and amounts, you could try consolidating your credit card outstanding with a debt consolidation loan. Did you know you could also transfer your personal loan (if any) to this loan? This way you will have to deal with one single payment for all your loans. While looking for a debt consolidation loan, look out for processing charges and the rate of interest charged.
Additional Reading: How debt consolidation loans can be useful for you?
Balance Transfer: Credit Card balance transfer is another way that can help you sail out of credit card debt. A credit card balance transfer means you transfer your existing credit card outstanding (1 or more) to another credit card. The new card allows you an interest-free period of up to 90/180 days during which you can make arrangements for paying off the debt. Credit card companies often charge a processing fee. It is good to look for cards with the lowest processing fee.
Additional Reading: Choose among these 5 credit cards that offer 0% interest on balance transfer
Convert Spends into EMIs: If you find yourself struggling to pay off the credit card debt, you can try talking to your credit card issuer and request for paying off the debt in EMIs. Paying off credit card outstanding in EMIs is similar to EMIs that you pay for any other loan. You can either choose to pay the entire outstanding into EMIs or select to clear your big-ticket expense by EMIs. Here, it is good to note that conversion into EMIs will entail an interest rate and processing fee too. However, this interest rate is cheaper than the interest charged on the outstanding.
Ensure Reminders for Prompt Payment: Prompt and full repayment is a non-negotiable requirement if you are looking to clear off your credit card debt. When it comes to credit cards, each delayed or defaulted payment ends up with late payment and interest charges. If you are failing to make payments on due dates, it is good to set up reminders or use the automatic debit facility. You would also need to aim to clear off the entire amount on your bill each month. Paying just the minimum amount due is not helpful.
Consider Going in For A Loan at Lower Interest Rate to Clear Your Debt: The interest rate on credit card debt is one of the highest in the market. There are other unsecured loans like personal loans or short-term credit options that are available for a much lower rate of interest. You could avail them to clear off your high interest bearing credit card debt. However, this is not an option that we would recommend you use all the time. Availing a loan to clear another should be the last resort or a one-off event only.
It’s always better to be safe than worried. As mentioned above, credit card debt is one of the most expensive debt one can owe. Hence, it is prudent of one to ensure they always pay their outstanding dues on time.
Following ways shed the light on how to avoid credit card debt:
Use Your Card Smartly to Time The Billing Cycle: Each credit card comes with a set billing cycle. Being aware of the date of billing helps. You can time your purchases/usage of cards in such a way that you get a maximum period of credit. This will help you in tiding over small periods of financial crunch. If you have more than one card, it is good to put to use the billing cycles of both the cards to your best advantage.
Pay Attention to Your Credit Card Statement: Your credit card statement is a good starting point to see why you are accumulating debt on your card. This will also help you verify if all transactions shown on the statement are made by you and not due to your card being misused by others. It will also help you monitor transactions on add-on cards if any. The statement will also show you the interest and other charges you are paying on your card.
Minimize the Number of Cards: It feels nice to own many credit cards and make yourself eligible for various offers. No matter how convenient it is, holding multiple cards increases the chances of defaulting on bill payments. It is easy to lose track of due dates and amount payable and also increases your tendency to spend. So, it is good to cut down on the number of cards you own.
Spending on credit card is easy. We recommend that you spend only those amounts that you are confident of repaying because it is quite difficult to get out of the credit card debt spiral. This not only causes you financial distress but also drives down your credit score.