How to pay off credit card debt ?

Debt can be your worst enemy if you are looking to get on a journey towards financial freedom. Consumer culture has romanticized the idea of using credit cards; however not everyone understands its implications. Credit card debt in India has been rising at a fast pace, and it has become one of the primary reasons for many people’s financial stress. Making purchases on borrowed money is not necessarily a bad thing. However, when you start borrowing more than you can pay in time, especially for items you do not need, that can be a huge problem. Let us look at some things you can do to pay off your credit card debt in India.


Budget beforehand - If you use a credit card, it becomes difficult to remember how much you have spent and how much you have to pay back. Some studies show that when a person uses a credit card, there is less pain of spending money than when a person makes the same purchase through cash. This makes it essential for people to budget their spends beforehand. You can either pre-decide your budgets for various things you are going to spend on, or you can choose to set aside some money as soon as you make a payment through your credit card to use that money to pay your credit card bill. Both of these techniques should help you keep your expenses in check and save you from getting caught up in credit card debt in India.


Keep in check - One of the best ways to not end up with a pile of credit card debt in India is to contain your credit card utilization at a maximum of 30%. Whenever you exceed this limit, make sure you pay off some amount and immediately get back under the limit. You will have to keep this check on yourself and ensure that you don’t come up with excuses to break this rule. In the long run, it has the potential to save you from a lot of unnecessary financial stress and obligations. Maintaining this habit would also positively impact your credit score, which could help you bring down the interest rates that you will be charged.


Cut down spends - If you have high credit card debt, it is highly advisable to think about your spending habits again. It is good to use an expense tracker like www.chatwithnerd.com for the same. Continued debt puts pressure on your spending capacity since a considerable part of your earnings are spent on paying interests. Hence, it is best to cut down on your expenses for some time and pay off your debts first. It will not only make your financial burden much lighter but will also let you spend more lavishly in the future.


Make use of reward points - Most credit card companies offer reward points whenever you make a transaction. These reward points often come with an expiry date and some conditions. It is essential to use these reward points wisely and pay off as many bills as possible through these so that the money saved here can be used to pay off the debt.


Bring the interest down - If your credit card debt amount is high, you could consider taking a lower interest loan from a bank to repay your credit card debt in India. Since interest rates on credit cards can be as high as 2.5 - 3% per month, it makes much more sense to take a loan at 10-12% per annum from your bank against some collateral and repay the high-interest debt first.


Investing comes later - It is a great habit to put some part of your salary in an investment account through a SIP. However, if you have mounting credit card debt in India, it is better to put the SIP’s on hold for a while and use that amount to pay off the debt. Every investment is made with the plan of earning a particular interest in it. If you have an obligation that you are paying interest on, then it makes less sense to put your money elsewhere unless the part you are earning there is higher than the interest you pay on your debt. Since credit cards have high-interest rates and risk-free investment options, do not offer such high-interest rates, it rarely makes sense to continue a SIP when you have credit card debt.


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