There is no doubt that credit cards are one of the best financial products today.
It can be said that credit cards have certainly revolutionize the way finances work.
A credit card allows you to borrow money on a credit to purchase goods & services and payback the same every month. But there are some ways to get rid of credit card debt.
Credit card companies offer you lucrative offers and features including – fuel surcharge waiver, dining discounts, and so on.
However, for all the benefits offered by credit cards, if you have not paid their bills on time or you have not use the card sensibly, you have every chance of falling into credit card debt trap. Moreover, it will also make your credit score to fall, making it difficult to obtain loans or other credit cards in the future.
Ways to get rid of credit card debt
However, it is not the end of the world and you can come out of credit card debt using these following methods.
1# Know Your Billing Cycle
If you really want to make the most of the credit-free period, make sure you are well-versed with your credit card billing cycle. Let us assume, if your card company offers you a credit-free period of 30 days, make sure you know that it does not start from the day of your purchase, but from the first day of your monthly billing cycle.
When you are aware of your billing cycle, it will help you in planning your purchases and above all, you will be able to manage your card payments in a better way.
2# Redemption Of Investments
This option will prove fruitful only if the liquidation of the existing investment does not have a high opportunity cost. For instance, closing fixed deposit accounts for repaying a credit card debt can be a good idea but make sure the interest rate applicable should not be more than 9%.
This is much lower than the interest rate you have to pay even on other loan options including personal loan, EMI conversion, and gold loan.
On the other hand, if you choose to redeem equity mutual funds, it may result in a high opportunity cost, particularly during a bullish market trend.
These are the times when the returns on equity investments can be as high as 20% or even higher making personal loans a much cheaper option.
3# Restrict The Number Of Credit Cards
You may receive a number of offers for new cards from the sales executive and from countless e-mails being sent to you by various credit card companies & banks.
These offers seem enticing and the fact cannot be denied that a credit card is a great financial accessory. But, if you already have one credit card but you are applying for more cards, then you will have the risk of falling into debt trap.
In addition, the buy-now-pay-later option lures even the most budget conscious individuals to overspend and splurge on non-essentials.
4# Credit Balance Transfer
Your bank will offer you this facility in the event you are having a significant outstanding balance. As per this facility, you have the facility to transfer your outstanding balance from one credit card to another.
You also have the option of fixed duration balance transfer within which you can make the repayment at an interest rate that is lower as compared to what you would have paid on your regular credit card.
Usually, the rate of interest is 9-10% (varies from bank to bank). Some banks also offer a lifetime duration option to make the repayment, but the interest rate is on a higher side i.e. 12-24% (varying from bank to bank). If you are looking to avail this facility, there is a processing fee i.e. around 2% of the owed amount you are looking to transfer.
Once the bank has verified all your details, they will send you the cheque or demand draft in favour of your existing card that you can use to repay the first card.
5# Convert Your Outstanding Dues Into EMIs
This is another option you can use to get yourself out of the credit card debt. You can choose to convert your outstanding balance into EMIs than transferring to another credit card or obtaining another loan. You have the option of converting your balance into EMIs of 3 to 12 months at the rate of interest of 18% per annum.
However, make sure you know that you have to pay a processing fee of 1.5 to 3% for the conversion of your outstanding balance into EMIs. If you fail to pay your EMIs on the due date, a standard interest rate will be charged on the balance amount.
6# Make Your Spending In Cash
Till the time you have paid all your credit card dues, you should cut down your expenses and choose to live on cash. Lock away all your credit cards till the time you have cleared all your debts. You need to be patient as you make changes to your uncontrolled financial behavior. Once you have mended your financial health, you will definitely feel good about your frugality.
7# Talk To Your Credit Card Company
If you are not able to pay off your debt owing to some financial crisis or job loss or may be due to some personal reasons, the interest rate keeps on surging. This may make it difficult for you to settle at a later stage. Therefore, make sure you have a word with your bank about your financial situation. If your situation is genuine, then definitely your bank will provide temporary assistance.
8# Opting For Automatic Payment Facility
Since credit cards are accompanied by high-interest rates and late payment fee, you can opt for an automatic payment facility.
As per this facility, you can avoid missing bill payments on time. This will help in deducting the bill amount from your account without manual interference and you don’t need to worry about missing the repayment deadlines, even if you are on the go or not have the access to your bank.
If you follow above points religiously then definitely you will get rid of credit card debt and live your life peacefully.
Have you faced credit card debt problem? How you came out of that? Share your thoughts and experience in below comment box.
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