Six ways to get out of credit card debt

Holidays are the time for fun, family and shopping! Who doesn’t love to shop, eat, be with their loved ones and have the best time of their lives? Holiday festivities and unbelievable discounts from retailers tend to make customers go overboard with their holiday expenses. A huge amount spent at the spur of the moment, always comes down very heavily on an individual after the holiday fever is over. With the dawn of the New Year comes the huge burden of repayment of credit cards that were used to spend on holiday expenses. Customers might be hassled with what’s hitting them in the aftermath of the holiday season but there are certain damage control measures that we recommend that every credit card customer take to effectively manage their dues.

What’s on your plate?

Understand what kind of situation you are in while assessing the repayments that are due. Yes, delaying a payment is a great option, but that’s only pushing your problem away temporarily. It is not a wise idea to delay payments on credit cards as customers tend to turn it into a recurring cycle ending with more debts than before. Additionally, this has a negative impact on the CIBIL score of a customer and reflects badly on his credit history. It is always advisable to pay off your debts quickly, either by turning them into small monthly EMIs or by opting for multiple balance transfers.

How good is a balance transfer?

People with large outstanding payments can always go for a balance transfer option. This facility enables a customer to transfer his dues from an existing credit card to a new one. Many banks provide this option for a fixed period of time with interest rates lower that the existing card. They also give a customer lifelong repayment options with higher interest rates. Customers need to pay a processing fee of 2% to avail this option and after background verification the bank sends a cheque to the customer to repay his previous card dues and avail a new one. Although this looks like a good option, recurrent balance transfers will make a credit history look bad. Banks will reject new credit card applications made by individuals with repeated balance transfers which in turn will affect the CIBIL score too.

Can I convert my outstanding balance to an EMI?

Customers looking to avoid the hassles of balance transfers can always select the EMI option. Outstanding dues can be converted into monthly EMIs to be repaid at an interest rate of 1.49% to 1.99%. This is a very good choice to slowly and steadily pay back your huge holiday debts. But here again, if a monthly payment is missed, then the bank reverts back to the old rate of interest and the customer will be back to square one.

Do I opt for a loan to repay?

Customers pay the highest rate of interests for credit cards at 36% to 42% per annum. A better option would be to avail either a personal loan, top up loan or a gold loan to service off your credit card debts. Loans generally have lower rate of interests when compared to credit cards. Individuals tend to spend less while repaying a loan of any sort than on a credit card. Liquidating assets would also be a good option to repay piling credit card debts.

How do I negotiate on my interest rates?

Another good solution to reduce your credit card debts would be to negotiate with the bank to see if they can reduce the interest rate they currently charge on your credit card. Getting a lower interest rate or flexible repayment options would be of great help to lessen your debt burden. This again depends on the bank’s policies and the customer’s previous repayment patterns.

Is cash a lifesaver?

Till the time you have repaid all your outstanding dues, it will be wise to cut down on your expenses and always use cash for all kinds of payments. Carrying liquid cash always puts a curb on the amount you spend with a simple idea — the lesser cash you have the lesser you spend, more financial power enables a person to become extravagant. Having a huge credit card debt pile is intimidating, but efficiently wading through that and getting your finances back in order is important. Such situations can be avoided if a spender initially calculates his financial capacity and his expenses do not exceed the stretch limit. It is also important to keep in mind that any kind of financial backlog will have a negative impact on the CIBIL scores and the credit records of a customer.