No doubt those credit cards are great assets which can help in managing the finances. But they can also get you into the darkest depths of debt if you use it recklessly. To avoid such a scenario, you should always spend only what you can repay, while using your credit card. Moreover, for a promising credit score, you should only spend 40% of your credit limit.
Those who spend more than their limit becomes vulnerable to vicious debt cycle, as a result their credit score goes down. Did you know that outstanding dues keep on rising at a rapid rate because of high-interest rates levied on credit cards (about 23% and 47% per annum)? In case, you couldn’t resist your temptations and fell into the debt trap, here are some ways to handle the situation:
Balance Transfer Credit Card
Is horrendous amount of debt mounting over you? If yes, try the balance transfer option. In other words, you can transfer your outstanding amount to a new credit card from some other bank. This is one of the cheapest and manageable options available for you to repay your debts.
The transferee bank will allocate you a period of buffer for the transfer. The buffer time is the time in which you can clear off your debts at a low-interest rate between 0 and 1.7% per month. The buffer time is that promotional period which is valid up to six months, one year, or two years depending on the bank.
This time period not only allows you to save some funds for repaying the debt but also slows the accrual of the interest. However, once the promotional period ends, the remaining amount will have the usual interest rate or higher interest rate.
Pay the outstanding amount in EMIs
EMIs have lesser rate of interest in comparison to credit card interest rates. The allowed time period for converting the outstanding dues into EMIs ranges from 24 months to 48 months depending on the bank.
Pay for purchases in EMIs
Credit card providers let their customers convert their big purchases into monthly installments. A cardholder with a transaction of at least INR 500 can convert this into EMIs within a span of up to 60 days. This will attract an interest cost and blocks your limit for the entire purchase amount.
Take a personal loan
If you have more than one card with huge debts, then you should opt for a personal loan. You can consolidate all your outstanding credit card debts in one loan.
The rate of interest for a personal loan ranges between 10.65% and 24% per annum while the credit cards attract a rate of interest between 23%and 47% per annum. Therefore, you will be able to pay your credit card debt payment via a loan. You will be paying for a high-interest debt with a lower-interest loan, which can be repaid in easy monthly installments.