Wednesday, 7 March 2018

What To Do When You Have Too Much Debt On Your Credit Card


You would rarely find a financially independent person in current times who do not own credit cards whether single or multiple, multiple is more likely.  Most shopping and other transactions whether online or offline are done using the credit cards. These cards not only offer the most obvious convenience of buy now and pay later but also eliminate dependence on cash and of course there are attractive reward structures. So here is the good part but there is always a flip side, not being careful with their use could easily mean that you have too much debt on your credit card. What can you do if you find yourself in such a position?
Dealing With Too Much Debt on Your Credit Card:
Too much debt on the card has a lot of problems associated with it. This can be the cause of low CIBIL score, a high debt means the high incidence of interest and fines and of course it could be a potential debt trap. Here we offer a few suggestions that can help you deal with the situation:
Ø  Consider a Balance Transfer:
A balance transfer is an option of transferring the balance from one credit card to another; this could be done in the case of multiple cards too. While even after opting for a balance transfer you still have to pay the dues but you get a reprieve of 90 days in this case. The new card company allows you a credit free period of 90 days which may give you some time to get your finances in order and then pay the dues. Additionally, you could opt to shift your balance to a card with lower APR, thereby reducing your interest cost.

Ø  Start Paying Dues With Highest Interest Cost:
Credit card debt is known to be very expensive but there is a variation in the interest charged by card companies depending on their policies. APR (Annual Percentage Rate) on credit cards could be as high as 36% in certain cases. So when you have collected a large debt on your card, the first thing to do is to check for the APR of each card. While it is not advisable to miss paying any card dues but it’s a good idea to focus on the one where the interest cost is highest and pay that one off the fastest to reduce your interest cost and burden while continuing to pay the minimum dues on the rest.

Ø  Pay the lowest overdue balance first:
Another strategy that one could adopt is to start with clearing the dues on the credit card that carries the lowest outstanding balance. If you have more than one card then it is obvious that all cards will not have the same outstanding balance. Pay off the lowest balance first so that at least one of the cards balances is off your report. Then you could go on to the next credit card balance. So you could pay the entire dues on the card with the lowest balance and for the rest pay the minimum balance in the meantime.

Ø  Start Being a Disciplined Card User:
This may seem to be the easiest of all the above suggestions but yet the most difficult one to follow. Most likely (barring a few unexpected situations like a medical or personal emergency), the cause of too much debt piling on your credit card is being undisciplined while using your credit card. Spending more than you can pay at the end of the month, being an impulsive spender, paying only the minimum amount due on your cards frequently are some of the reasons that can lead to this situations. Thus being disciplined in paying you full dues and not carrying them forward and not missing any payments can help you overcome this problem. Budget your card expenditure and stay within it, avoid impulsive buying so that you do not add to the already existing debt burden.
Well, in an ideal situation one must not pile up too much debt on their credit card but in case this has happened, little planning and disciple can help you deal with the problem.

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