Credit cards are the most convenient form of credit in today’s fast-moving world. It is instant credit! You also get various add-on benefits like reward programs, air miles, cashback, discounts, a privileged shopping experience and more. Credit cards are available to individuals with fuss-free eligibility criteria and allow us to fulfil many of our monthly needs.
However, credit cards can act as debt traps if not used carefully. You may get carried away by the available credit limit and spend more than you can afford to repay the next month. This results in payment defaults and interest accruals which can translate into mammoth debt in a span of just a few months. It leads to a snowball effect, impacting your credit scores and future credit eligibility.
We should use credit cards in a controlled manner and plan our bills smartly to avoid any such unfortunate situations. If you have accrued a considerable credit card debt, don’t worry. There is always a resolution out of it.
Follow these simple steps to pay off all your credit card dues faster:
- Track all your credit card dues
This may seem like a very simple thing to do, but it is very effective. When you are tracking all your credit card dues and the due dates, you are able to budget your monthly finances better. You are able to make the payments on time to avoid any late payment charges.
When you have a visual idea of how much you owe every card, you are able to decide what to pay first and when to pay. When you bring discipline to your monthly budgeting, you automatically start clearing off the dues faster.
- Pay off the high-interest rate cards first
Since you have already made a list of all your credit cards and the outstanding on them, it is easier for you to determine which card is proving to be very costly for you. Choose the one that is accruing the highest interest amount and pay it off first. This way, your interest burden is reduced and you get some breathing space to pay off the rest. The issue with credit cards is that the interest amount will also attract further interest which, if not nipped in the bud, will prove to be very hazardous to your finances.
- Convert payments to EMI
Credit cards offer EMI options to pay off the outstanding amount. These EMIs will come with a relatively lower rate of interest than your APR with a fixed tenure that will allow you to plan well and clear off the dues. This way, you will be able to reduce a considerable chunk from your total outstanding. Also, when you convert your outstanding amount into EMIs, they won’t accrue more interest than what is prescribed on the EMI plan. This way, your interest burden will also reduce a lot.
- Go for a balance transfer
Balance Transfer is a very effective tool in managing your credit card debt. It enables you to move the balance on an existing credit card to a new card account at a lower APR. In theory, you’ll get a new credit card with the same balance but a lower interest rate.
Some lenders now give 0% interest over the first few months to help you pay off your loans quickly and for less money. Balance transfers help you to consolidate your debt and pay it off until it becomes too much to bear.
- Opt for debt settlement
Debt settlement is a negotiation tactic where you negotiate with the lender to pay a lesser outstanding amount to salvage the debt. So, with debt settlement, you get to be free of your debt at a lower expenditure. However, debt settlement will be notified on your credit report which may have a negative impact on your credit score.
- Use your emergency fund if you have one
All of us have an emergency fund set aside for a rainy day. Breaking it open now could be a smart idea. We put in a lot of effort to build the fund, so using it now is preferable to paying an excessive interest rate. You should use those funds to pay down your debts, and you should be able to start investing again quickly.
- Recognize and agree that you are in need of additional help
If you can’t handle your debts after doing all of the aforementioned measures, it’s time to get professional support. For a nominal fee, you can contact a debt relief or credit counselling firm to help you handle your debt professionally. When you acknowledge that the situation has become out of your control, there is nothing wrong with finding professional assistance.
Credit card debts are risky. If not managed cautiously, it may lead to very unpleasant situations. Have a disciplined debt management system in place to ensure that all your monthly EMIs and credit card bills are paid on time. Never over-borrow; be well aware of your repayment capacity and borrow accordingly.
If you find that you are unable to manage your credit card debt, promptly contact your credit card company. Speak to them and understand what can be done to get you out of the mess. If necessary, negotiate for a debt settlement deal with them. Don’t hesitate to seek the services of a debt management professional to help you. A smart card user is a happy customer!
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