Ways by Which You Can Pay Off the Credit Card Debt
Last Updated : July 18, 2020, 2:17 p.m.
How do debts increase on my credit card? It could be due to high interest rates of 2.5%-3.5% per month on revolving credit. This goes up to 30%-45% a year and makes a big hole in your pocket. Remember, there’s no interest on a credit card if you pay your dues in full every month. The interest is charged only on revolving credit that arises when you pay the bill partially or don’t pay at all. The unpaid balance gets charged at the interest rate shown above. Credit card providers allow you to pay the due partially and prevent late payment charges. But if you do the same and continue that pattern, you will get caught in a debt trap over time. The sooner you come out of it the better it is for you. Read the post below and know the ways by which you can pay off a massive credit card bill easily.
Pay Off Credit Card Debt with Fixed Deposit (FD) or Recurring Deposit (RD) Savings
The easiest way to pay the credit card bills and get free from the burden of high-interest payment is to use the savings you have. If you have invested your money in FD or RD for future needs then it’s a great time to use them. You can withdraw money from your FD or RD and pay off the credit card debt. What are its benefits? First, it relieves you of any further payment. Second, your credit score improves and helps you borrow more in the future.
Don’t Use Your Credit Card Further
If you are already in a situation where you aren’t able to pay credit bills then it’s good for you to don’t use the credit card more. Because it only makes your case worse. The debt amount will increase and the credit card payment will be difficult for you. So, the best way is to stop the credit card usage until you pay off the balance debt amount. After that, you could use the card carefully so that the same situation does not arise again.
Pay Off the Debt With a Balance Transfer
You also have an option to transfer your credit card balance to a new credit card when faced with a high debt like situation on the former. Suppose, if you have a credit card with a high-interest rate, you can transfer its balance amount to a card that charges a lower interest rate and spends less money on interest payment. This is like paying your credit card debt using another credit card. You can use a balance transfer strategically to reduce the interest rate on your highest-interest credit card debt. There are credit cards that offer a 0% APR for a period of 50 to 60 days. A 0% APR allows you to pay off your credit card balance without incurring any extra interest charges. Like if you have INR 60,000 of credit card debt at an 18% APR, you could transfer that balance to a card that offers a 0% APR for 60 days. If you pay off your debt in the interest-free period, you can save a good chunk of interest outgo on your credit card payment.
Note: You need to pay a balance transfer fee too, so calculate the amount you save after the after factoring in the fee.
Pay Off Your Credit Card Debt With a Personal Loan
Paying off the credit card dues with a personal loan is the smartest financial strategy. If you’re in so much credit card debt that you can’t afford to pay from your regular income, you should consider a personal loan. It can further help improve your credit score by paying off the unpaid credit card balance. Using a personal loan reduces the number of payments you need to make each month. Paying off credit card dues with a low-rate personal loan can save your money. Personal loan interest rates are low compared to the credit card interest rates. And if you qualify for a personal loan at a low rate of interest, you’ll end up paying less money overall.
Pay from Your Mutual Fund Investments
If you have invested in different types of mutual funds like equity, hybrid or debt, it is wise to use them when the credit card debts are high. You can withdraw your fund units and encash them to pay the debt. It reduces your debt burden and helps you pay the credit card bills without affecting your monthly payments.