Tips To Handle Credit Card Debt Responsibly

If handled smartly, a credit card can be the most useful financial tool, but it can be a source of multiple financial worries if used ruthlessly. One needs to understand that paying off credit card debts on time is very important, as any failure or delay in paying the debts would cost you even more than you owe because the interest portion and late payment charges will also be included in the debt already accumulated. Carrying on this routine for a long time will put you in a debt trap and make it very difficult for you to escape it.

Staying in such a situation for a long time will negatively affect your credit score. The credit score is the most important tool that allows financial institutions to analyze your credibility before providing any further loans. On the other hand, staying in debt for long leaves you in the worst mental state, which increases your stress levels, keeps you sleep-deprived, etc, which affects not only your mental health but other aspects of your life as well.

Important Tips To Handle Credit Card Debt

Most importantly, you have to take care not to initiate any such step, which in turn lands you in a debt trap. Habits such as overspending, no repayments, or just minimum payments can put you in this trap. Hence, in this article, we will discuss a few points through which you will be able to gain a good amount of knowledge about how to handle your credit card debt so that you do not end up in a trap.

Jot Down All Your Debts in a Single Place

This might seem silly, but it is important. By writing down all that you owe, you can clearly understand how much you have to repay to the card issuers. If you are a multiple credit cardholder, you might unintentionally skip the repayment of one of the multiple cards. Hence, jotting down all the amounts due and the due dates of each card will help you manage your debt.

Plan and Strategise

Now you have to plan your repayment strategy. This requires you to analyze all the options available for repayment and then choose one that best suits you.

• The credit card bill can be converted into regular monthly installments which generally are provided at a low-interest rate.
• The other option is that you can apply for a personal loan. You can repay the credit card bill with the amount of personal loan disbursed in your account and then you can pay EMI for personal loan repayment. This is because a personal loan is granted at a lower interest rate as compared to the interest rate on credit card debt.
• There are 2 ways to repay your debt – either pay the bills from lower to higher amounts first or pay higher interest rates bill first. Paying through the first way will give you psychological satisfaction that your bill amount is reduced. However, the second method will prove to be cheaper as high interest-bearing debts are paid off first.

Income and Expenses

Another point to consider while debt repayment is that you should have a clear knowledge of your monthly income and expenses, which include house rent, monthly groceries, other EMIs, and many other things. You should manage all your expenses so that you are able to pay the credit card bill as well.

Avoid Overspending

Just because you have a high-limit-bearing credit card does not mean you will start spending blindly. You should spend on your credit card only when it is necessary. You should always be aware that, in the end, it is only you who has to pay off your credit card bill.

Pay More than the Minimum Due Amount

You are wrong if you think that paying the minimum amount every month towards the credit card bill will put you in a safe zone. Technically, you should be paying the whole amount due towards the credit card, but if you are not able to pay the full amount, you should pay something that falls around the full amount or is more than the minimum amount. This is because the interest rate on these credit cards is quite high, and not paying the debt on time would leave you in unwanted circumstances.

Use the Balance Transfer Facility

You can always transfer the balance of a credit card from one bank to a credit card from another bank with a low interest rate. By doing this, all your credit card bills will be consolidated into one card, and you will repay them at a much lower interest rate.

Bottom Line

Managing credit card debt takes proper planning and time, but the good thing is that once you streamline this, you can save a lot on your interest expenses. Also, you will always have to follow a structured plan to remain out of debt because it is easy to get into debt, but handling it responsibly and getting out of it is quite a tough task. That is why you should always avoid spending over and above your financial limits. Adding to this, you should always have a strategy in mind as to how you will repay your credit card debt. A balance transfer is a great facility offered by banks these days that can help you align your debt in an effective way.

Staying out of debt will help you lead a stress-free life and help you be more aligned with your ambitions.