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Credit cards provide numerous benefits and advantages, including earning cash back and credit card reward points on transactions. Credit cards, when managed wisely, may be a valuable capital transaction. However, if you use your credit card recklessly, you might accumulate a lot of debt, damage your credit score, and more. When you use your credit card more than you should and spend money without keeping track of it, you may find yourself owing a large sum on your credit cards. These numbers keep piling up as a result of the exorbitant interest rates charged by credit card companies. Credit card debt is one of the most expensive loans, with interest rates ranging from 30% to 40% p.a. Therefore, you should always keep track of your transactions to avoid credit card debt.
Make no new purchases with your credit card until all of the outstanding credit card balance has been paid.
Examine your monthly earnings, essential costs, and savings, and then allocate amounts to pay off your credit card debt. A visual representation of what you have and how much money you'll need to pay off the extra debt will help you.
All credit cards have their own set of terms and conditions, as well as varied interest rates. If you have bills on many credit cards, prioritise the ones with the highest interest rates and pay them off first. This is an efficient strategy to reduce your overall dues.
If you are unable to repay your credit card balance, you can request your bank to convert the outstanding credit card balance into monthly EMIs. Banks impose a monthly interest rate of 2-3% for allowing the EMI facility. There will additionally be a processing fee of about 1-2% of the outstanding credit card balance.
You can pay off your outstanding credit card balance by using the transfer credit card balance option. Using a balance transfer, you can move your balance from one card to another or from numerous cards to a single card. This provides you with temporary debt relief. The bank offers a credit-free period of up to 90 days to make it easier to repay your outstanding credit card balance.
If you don't want to transfer your credit card balance from one credit card to another, consider this option. The interest levied on credit cards is the highest of all service debts. As a result, it is preferable to choose a lower-cost loan to pay off this high-cost debt.
Here are some important tips that you must follow to avoid credit card debts.
Taking full advantage of the holiday season is the greatest method to manage your credit cards. You may be eligible for up to 50 days of interest-free credit on your card, depending on your payment cycle and the day you make a transaction.
Because credit cards have a high-interest rate and a late payment fee, using an automatic payment facility to avoid missing bill payments is recommended. You won't have to worry about missing repayment dates if you're travelling or don't have access to your bank because the bill amounts will be withdrawn from your account without your action.
You may receive offers for new cards. The offers appear to be tempting, and there is no doubting that credit cards are useful financial tools. However, using many cards raises your chances of sliding into a debt trap due to missed deadlines. Furthermore, the buy-now, pay-later concept entices even the most frugal shopper to overpay and splurge on non-essentials.
The greatest method to avoid credit card debt is to pay off your entire bill each month. Starting each month with a zero amount lowers the possibility of going into credit card debt. Because your credit card has already been paid in full, you never have to worry about meeting the minimum payment. You must be disciplined and only spend as much as you can afford to pay off in a single month to do this.
Holding excessive credit card debt comes with a lot of concerns, including late payments, missed financial goals, and possible credit score damage. Credit card debt is avoidable if you maintain your spending and payment patterns.
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Posted on 16 May
Roshani Ballal
Academy by Bajaj Markets
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