When used recklessly, credit cards can push someone into a massive debt trap. Here is how to pay off your credit card debt fast.
With great power comes great responsibility, they say. The same holds true for credit cards also. If used prudently, credit cards can not only help manage your financial needs, but can also prove to be your best friend in times of crisis. However, when used recklessly, they can also push someone into a massive debt trap.
Here we are taking a look at some smart ways to avoid getting into a credit card debt trap and also pay off your debt fast:
1: Limit the number of cards: The first and foremost thing to do is to limit the number of your credit cards. That is because the few cards you have, the less will be your willingness to spend on unwanted things. And the less you spend on your cards, the less debt you will accumulate. There is no denying the fact that sometimes the offers for new credit cards from sales executives seem irresistible. However, having multiple cards in the midst of buy now and pay later deals enhances your chance of falling into a possible debt trap.
2. Opt for as little credit limit as possible: “You are our valued customer and the bank is happy to increase your credit limit.” Or, “Opt for this card and we will give you a higher credit limit.” You must be getting such tempting offers from the representatives of various banks. However, if you haven’t fallen prey to these offers yet, then thank your star. For, such offers are a sure-shot way of sending one into a debt trap. As your credit limit gets enhanced, the more will be your urge to spend.
3: Track your bills regularly: It always helps to track your credit card bills regularly. Miscellaneous charges are usually levied by the card-issuing banks. There may also be erroneous or fraudulent transactions sometimes. If you keep missing on that, then the fault will be yours, while the debt will also keep mounting.
4. Pay more than the minimum due amount: Most credit card holders follow the practice of paying just the minimum due amount (usually 5% of the balance outstanding). They forget about the abnormally high interest rates of credit cards, which make is difficult for one not only to clear the dues on time, buy even during one’s lifetime if one keeps on defaulting on payments also! One just keeps paying and this process never ends as the outstanding amount remains almost the same. So, if you don’t want to get locked in unending debt spirals, then always pay more than the minimum amount due.
5: Opt for balance transfer facility: Opting for balance transfer or transferring your dues from one credit card to another is a good option for you in case you are caught up in a bad debt cycle. This facility allows you to shift your outstanding amount from one card to another card at lower interest rates, which may give you a temporary relief for a certain period. However, once the period ends, regular interest will be levied on you.
6. Convert payment to EMIs: Some banks also allow customers to convert their outstanding amount into monthly EMIs. Usually lower rate of interest is charged on EMIs and clearing one’s debt also becomes easier with the convenience of paying smaller amounts per month.
7. Clear highest-interest debts first: Instead of clearing off debts on first come first basis, you need to first pay off debts on the credit card that charges higher interest rate. This will help you reduce your interest outgo as unpaid dues with higher interest rates accumulate interest faster.
8: Go for Auto Pay Facility: If you are always late on credit card payments or simply miss out on credit card bill payments, then opting for an automatic payment facility will be a better option for you as credit cards come with high interest rates and late payment fees are also levied. Opting for Auto Pay, if you keep sufficient bank balance, will allow you to clear your bills on time as the bill amount will get deducted from your account automatically.
9. Take advantage of holiday period: You should also take advantage of the holiday period as a large number of credit cards provide interest-free credit of up to 50 days. Therefore, in case you are facing a short-term financial problem, you should buy things in a planned way to enjoy the maximum holiday period and also avoid interest payment on your purchase.
10: Talk to the card provider: Despite making your best efforts, if you are still unable to clear the outstanding amount due to some unavoidable reasons, then it is better to talk to the bank or the card-issuing company itself. The bank will most likely give you some relief if your reasons are genuine. For instance, if you have recently lost your job.