A credit card is an important tool to meet the urgent money requirement. It acts as advance cash when needed. Although many people use a credit card when needed, but they are unable to repay the credit card money on time and keep depositing additional money in the form of interest. Interest is charged at a higher rate on the credit card balance and it keeps increasing if you cannot repay the outstanding amount on time. You should use a credit card only in case of emergency or when it is very much needed.
If you use it with carelessness, it will also spoil your budget and extra money will have to be given to the bank. If you are troubled by debit or credit card debt, there are several ways to get out of it. Through this article, you are being given information about simple and new ways to get rid of credit card debt.
Credit card balance transfer
You can transfer the outstanding credit card balance from one credit card to another credit card charging less interest. You can transfer more than one credit card balance to a single credit card. Transfer of credit card balance gives a credit free period of 90 days. During this period, there is no interest on the outstanding amount and you get enough time to repay the remaining amount. With this, you can get rid of credit card debt at the earliest.
Personal loans attract 14–22% interest in a year, which is lower than credit card rates. Credit card dues attract 25% to 40% interest in a year. In such a case, if your credit card balance is high, then you can consider repaying it by taking a personal loan, as interest is charged at a tax rate in a personal loan compared to a credit card.
Use snowball system
You can use the snowball system to pay the credit card balance. You should pay the lesser amount due first. If you pay the amount of one of your credit cards that has a low balance, you will benefit because repaying the outstanding balance improves the credit score and credit utilization ratio. It is good if your credit utilization ratio is less than 30-40%. So get rid of credit card dues and improve your credit score.
Redeem the investment and repay the loan
You know that the credit card dues attract 24-36% interest in a year. At the same time, 6.25-7.5% on FD investment and PPF and NSC are currently offering 7.9% interest for the October-December quarter. Along with this, post office schemes also get returns at almost the same rate. At the same time, a good equity mutual fund can give 11-12% returns in a year. We cannot compare the returns on various investment options with credit card interest rates, as credit card interest rates are much higher than these. PPF, NSC and post office schemes may have a lock-in period, but FD can be broken easily. So, if your credit card balance is very high and you have no other option to repay it, you can liquidate your investment and pay the outstanding amount for it.
Consider taking a top-up loan
If you do not want to take a personal loan, you can take a top-up loan. You can take a top-up loan on your existing home loan. But you will get approval of top-up loan only if you have paid your home loan EMI regularly for two years or more. Banks approve top-up loans by making a reasonable estimate of assets. You can use the amount received through this loan to pay the outstanding credit card balance.
Seek help from family and friends
You can borrow from your family members or friends if needed and family and friends will not even take interest on borrowing from you. But in case of an emergency, it is okay to borrow from your family or friends.
Talk to a credit card provider
In this case, you can also contact the credit card provider and request to extend the grace period. In an emergency, credit card providers also waive interest and to some extent the outstanding balance. So if your situation is very bad and you are in trouble, talk to the credit card provider and tell them about your situation. This will help you settle the credit card balance.