Extensive use of a credit card also results in a debt spiral that will not only ruin a person's budget but also eat into all of his/her future income, until it's cleared. Hence, if you are stuck with credit card dues, there are multiple ways to get rid of them.
Credit cards are one of the easiest ways out for an individual when faced with a financial crisis. Given the time now, especially during the lockdown, many used their credit cards, and now are stuck with dues. Credit cards are a great addition in everyone’s wallet but if you are deep down in significant credit card debt, quite early on in your life, you need to be wise and get rid of it. Experts say, do not think this to be spare money and spend it recklessly.
Additionally, extensive use of a credit card also results in a debt spiral that will not only ruin a person’s budget but also eat into all of his/her future income, until it’s cleared. Having said that, if you are stuck with credit card dues, there are multiple ways to get rid of them.
Strategies to stay out of credit card debt:
As the name suggests, credit card balance can be transferred and shifted. For instance, the outstanding money or the due on a credit card can be transferred to a lower-cost EMI repayment. The balance transfer method lets you not only shift from one card to another, but you can also shift multiple card dues to one card. Hence, according to experts, to ease credit card dues, one can use the balance transfer method. With the transfer the cardholder gets a fresh credit-free period of up to 90 days, to repay the amount without adding further interest on the due amount.
With the snowball method, you can pay off your credit card dues steadily one after the other, easing the repayment burden. You could opt to clear off smaller dues first, according to experts, as even clearing balance from a single card will help you improve not only your credit score but also the credit utilization ratio.
By taking a personal loan, one can repay the due amount. Even though this is something that could be opted for, it is not generally advised. However, if you are deep down in debt, you can always explore multiple options to repay your dues, including opting for a personal loan. Opting for a personal loan is not suggested because taking a personal loan is again like taking credit, but the catch is credit cards overdue attracts high-interest rate ranging from 36 to 40 per cent per annum or even more, while a personal loan comes at a much lower rate of interest ranging from 11-24 per cent per annum.
This is another type of loan you can opt for, other than a personal loan. You can go for a top-up loan only if you have an existing home loan. Once you apply for the loan, the lender conducts due diligence on the property and then approves it. You can easily get approval for a top-up loan, if you have been regular with your home loan payments for 2 years or more, successfully. You can use this money to pay off your credit card debt. Even though the rate of interest of the top-up loan is close to the rate of interest of the home loan, note that there is no tax benefit linked with it.
This should be the last option that you should seriously consider. Note that the interest from investments even at the best will hardly yield half of that rate that your credit card debt attracts. Hence, you could break your FDs or other low earning investments to pay off the credit card debt. However, this can not be done on a regular basis or else you will not be left with any savings for an emergency.