Rolling over credit and not clearing dues every month have become common with cardholders. Most cardholders think credit card to be spare money and then spend it recklessly, because of which many people find themselves, deep down in debt.
Credit cards offer an instant solution to cardholders with most of their purchases and problems. Almost all banks offer a wide range of credit cards for different needs.
Even though these cards are a great financial solution, if not used smartly cardholders can easily fall into a debt trap. If you do not clear your bills on time, your credit card becomes a liability at the end of the month with a huge bill to pay off.
Rolling over credit and not clearing dues every month have become common with cardholders. Experts say most cardholders think credit card to be spare money and then spend it recklessly. Because of which many people find themselves, deep down in debt.
If you are also stuck with credit card debt, here are some of the ways by which you can pay it off;
1. The balance transfer is one of the ways by which you get rid of your credit card dues. The balance transfer facility can be used to shift the outstanding money on a credit card to a lower-cost EMI repayment.
With the balance transfer method, you can not only shift from one credit card to another but also shift multiple card dues to one card. This way you will get a fresh credit-free period of up to 90 days (depending on the card provider/bank), which will give you more time to repay the amount without adding further interest on your dues.
2. Snowball is another way by which you can pay off your credit card dues. This method helps the cardholder payoff the dues steadily one after the other, therefore easing the repayment burden. This way you can start to clear off smaller dues first.
Note that, clearing balance from a single card can help you improve not only your credit score but also the credit utilization ratio.
3. Another option is you can opt for a personal loan, to pay your credit card dues. Even though this is not a great option when deep down in debt, cardholders can explore the option of opting for a personal loan.
The interest rate attracted by overdue credit cards usually goes up to 36 – 40 per cent per annum. On the other hand, a personal loan comes at a much lower rate of interest, 11 to 24 per cent per annum.
4. Top-up loans can also be opted by cardholders, but this is for those who have an ongoing existing home loan. Borrowers who have been regular with their home loan for more than 2 years successfully, can go for this option of a top-up loan.
Once you apply for a top-up loan, the bank/loan provider conducts due diligence on the property. Once the loan is approved, you can use the money to pay off your credit card debt. The rate of interest of the top-up loan is close to the rate of interest of the home loan. There is no tax benefit linked with the top-up loan.
5. Another option is to liquidate your investments. This is something you should seriously consider, as should be kept as the last resort. Even though you will be earning interest from your investments, a credit card debt attracts around 36 to 40 per cent interest per annum, which is almost double of what you will earn from your investments.
Hence, experts suggest breaking low earning investments such as FDs to pay off the credit card debt. Breaking off an investment should only be looked at in rare cases.