How to reduce debt if you have overspent on your credit card this Diwali?

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November 02, 2021 7:03 PM

If used judiciously, credit cards provide an excellent opportunity to buy goods and services now and pay for those at a later date.

credit card, credit card overspending, managing debt, how to reduce debt, credit card payments, buy now pay later, interest, penalty, interest rate, personal loan, cashback, discount, Diwali shoppingA credit card user needn't pay any interest, if the dues are paid on time.

If used judiciously, credit cards provide an excellent opportunity to buy goods and services now and pay for those at a later date. Moreover, a user needn’t pay any interest, if the dues are paid on time.

With many banks giving discounts and cashbacks on their credit card payments, more and more consumers are opting to pay through their cards for purchases made during this festival season.

However, while using a card, the user should keep in mind his/her capacity to pay the entire bill on or before the due date to avoid paying any interest and/or penalty for late payments. A credit cardholder should be extra careful, because the interest rates and penalties on outstanding balances and defaults are very high.

In case a cardholder has already spent beyond his/her current earning level and is finding it hard to pay the bill, how should he/she manage his/her outstanding debt?

“This holiday season, if you have overspent on your credit cards, it is best to immediately start making small payments so that the outstanding on the credit card balance drops by the time the bill is generated. For the rest of the outstanding, credit cards offer a variety of EMI offers that shoppers can avail to reduce the pay burden,” said Anil Pinapala, CEO & Founder of Vivifi India Finance.

“However, it is best to use products that suit the need of the expense and users can choose FlexPay to pay for their everyday or aspirational needs as FlexPay offers complete flexibility for shoppers on the repayment options. Whatever is the choice of payment, the best strategy for repaying on time is to automate payments,” he added.

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Giving his opinion, Abhishek Soni, CEO & Co-Founder of Upwards, said, “The best way is to consolidate 2-3 smaller credit cards and take a personal loan to close them off. This will not only improve your cash flows and reduce your borrowing interest cost but also lead to a stronger credit score buildup.”

Expressing his views, Nitin Mathur, CEO, Tavaga Advisory Services, said, “The thrill of Diwali may have caused breaking of budget constraints resulting in overspending. However, if you have already gone overboard this holiday season, there are alternatives to reduce your credit card debt.”

“Monetizing reward points and cashback facility before the credit cycle expires can provide the necessary relief to offset large credit card obligations. You can claim cashback and redeem reward points to pay off your credit in the following billing cycle if the bill has already been created,” he added.

“Setting up monthly bill payment reminders and selecting an appropriate and suitable debt repayment strategy, such as the “snowball method,” in which the smallest debt is paid first, the “avalanche method,” in which the largest or highest interest rate debt is paid first, or the “debt consolidation method,” in which all debts are consolidated into a single account for easy repayment, is also critical,” Mathur further said.

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