A lot of people get stuck in the trap of paying with their credit card and not clearing the bill at the end of the month. The matter gets worse for those with more than 1 credit card. Piling up credit card debt is bad enough as it is; add to that the rate of interest and you end up losing more than what you bargained for.
It is in these situations that you need the help of financial advisors to get out of the ditch. If you find yourself in one of these situations, not being able to manage your credit card debt, then we have some help for you.
1. Stop adding more debt
The obvious thing would be to stop using your cards altogether. At the least, you should do this just for a while so you can get back on track and bring in some financial stability. Many a times having more than 1 credit card can become more of a hassle than comfort. Therefore, avoid using all your cards even if you don’t have any debt on the other cards. Instead, pay with cash, debit cards, or even with UPI apps like BHIM or Tez so you don’t pile on more debt.
2. Use your debit card instead
If you are an impulsive buyer or can’t manage your income well then it is advisable to stay clear of credit cards altogether and opt to use your debit card instead. Set up a budget for yourself, stick to your budget, and spend wisely to avoid any more debts. Though it can be hard to get out of the cycle of paying for things with money that you don’t have, you will thank yourself later.
3. Put your savings to use
It may be a tough choice, but if you’re dealing with credit card debt then please put all your savings and emergency funds to use. One of the most common mistakes that financial advisors often see is when people continue accruing debt while keeping their savings intact. You may be saving for a new car, but it can wait until you get all your financial problems cleared. Besides, this IS an emergency so don’t think twice before using these funds!
4. Cut back expenses
This sounds like an obvious advice but cutting back even the trivial expenses can save you a fortune annually. You need to cut back on unnecessary and luxury expenses. Use those savings towards the debt, you may be able to pay a huge amount this way. Saving even Rs.700/month from these expenses will allow you to clear Rs.8,400 in a year – plus the additional interest that you would be paying for that amount.
5. Pay off the card with the highest interest first
If you are in debt on more than 1 credit card, then pay the one with the highest interest rate first. This will help clear the biggest debt accumulator first, so you can plan to solve the rest of your debts. Along the process you can also ask your credit card company to cut back on the interest rates. This shows that you are serious and dedicated to pay your dues and may even convince the bank to cut back some interest rates.
6. Arrange for lower interest funds from trusted sources
If you absolutely don’t have any funds to fall back on, then the best thing you can do is borrow money from trusted sources. Borrow from a friend or from a trusted source like agroup savings and lending app such as KyePot where you will be able to pay off the borrowed amount at a much lower rate of interest in a controlled manner. This way, you will be able to pay off large sums of money and not have to worry about accruing more debt through high variable interest rates of the credit card(s).
Once you have cleared your debts (or even gotten them firmly under control) and if you don’t want to find yourself in this debt laden situation again, you need to make some basic changes to your financial life. Start by setting some money aside every month for a financial emergency fund. Ensure that this money is not locked in a long-term plan like a SIP or an instrument where you get penalized for withdrawing early, like a FD. You are looking for a financial tool that offers you the maximum liquidity and helps build a savings habit.
With the KyePot groups, you get all of this and more. Build a savings habit, earn monthly dividends, borrow more than you have saved when needed, and best of all – it is digital. So you can track how you are performing month after month!
Remember, it’s okay to have credit debts and that you’re not the only one. As long as you have a good plan to get out of debt and you stay positive, the situation can teach you better money management. However, you also need to be cautious about impulsive spending so you don’t fall in that spiral of debts again.