India has seen a rapid penetration of plastic transactions in the last couple of years. For, Credit Cards have made lives infinitely easier while bestowing a range of benefits upon its users. In all, they have become an essential wallet buddy for people of age groups across the country.
Some of the best Credit Cards in India would not only facilitate a quicker, easier, and more convenient way of making purchases but also help in scoring a plethora of rewards, such as cash backs, vouchers, air miles, etc.
However, even the best credit cards like Citibank Credit Cards can have pitfalls if not used responsibly. If you use it without exercising caution and without having a structured & disciplined plan in place, you might easily find yourself trapped in a cycle of debt. If you are in such a position, we have compiled a list of tips and tricks to help you dig yourselves out the precarious debt position as quickly as possible.
Here’s how to pay off your credit card debts quicker than you thought possible so that you can enjoy financial freedom sooner.
- Know where you stand
Before you start reducing your Credit Card debt, start making an honest assessment of your current financial situation. Know your total outstanding on all cards, including the rate of interest, by heart. Thereon, if you have multiple Credit Cards, you should ideally aim to pay off the debt that is costing you the highest amount of interest.
Simply put, higher interest rates translate to a higher amount of interest being paid relative to the principal balance. Once you have cleared off the debt on the Credit Card with the highest interest rate, you can shift your attention to the Credit Card with the next highest interest rate, and go so forth. If you keep clearing your debts in order of the highest interest rate, you’ll have less interest to tackle on your cards resulting in paying less overall, thus getting out of debt more quickly.
- Put your cards away
While this might sound like a no-brainer, you should stop using your cards immediately. While you should keep your accounts open – as closing/ cancelling Credit Cards can affect your Credit Score adversely; you should aim at not using them till you clear off your existing debts. Put your Credit Cards stashed away in a place where you won’t have easy access to them and instead, look at paying in cash whenever possible. This will help in eliminating impulsive purchases as well.
- Request for lower interest rates
Try calling up your Credit Card companies to negotiate a lower interest rate. Even if you manage to cut down a few basis points of your interest rate, you will still manage to save thousands of rupees on interest. You can call up your Credit Card hotline and request lower interest rates. Try being polite and you never know, you might just end up getting your interest rates cut. Besides, you have nothing to lose and it’s worth giving it a shot at least once for each Credit Card you have.
- Cut down on your expenses
Even if you own the Best Credit Cards Available in India, one of the simplest ways to quicken your debt repayment is by budgeting as much as you can toward debt repayment. Look out for areas where you can cut back and cut down on any frivolous expenses by keeping a track of where your money is going. Once you have identified expenses you can do without, you will have some extra money freed up which you can be used to pay down your debt. Living without Netflix for a few months or sacrificing a few dinners are a few deductions which are worth it as it can help crush some debt.
- Pay off the Credit Card debt with the smallest balance
In case you have multiple cards that have outstanding debts which need to be cleared, concentrate on clearing the card with the lowest balance first. For instance, if you have Rs. 1,00,000 debt split three-way between three cards– Rs. 60,000 on Card A, Rs, 30,000 on Card B, and Rs. 10,000 on Card C, try to focus on paying off card C first. While this might not make sense financially as all cards still need to be paid, the psychological win you gain by clearing off one debt can help in boosting your confidence for the long road ahead. The only disadvantage of adopting this approach is that it ignores the interest rate suggestion which we pitched above thus possibly costing you more money in the long-run. However, the psychological boost that you stand to gain by completely eliminating debt on one of your Credit Cards is probably worth it.
- Pay the minimum balance
You should make sure that you at least pay the minimum payments required on your Credit Cards so as to avoid getting burdened with additional penalties and fees. That said, you should aim to pay more than just the minimum balance whenever possible as simply making the minimum payment each month will lead to you paying off your Credit Card debts for a long time while also shelling out a lot towards interest payments as well.
- Dip into your savings/ emergency fund to clear debt faster
It’s called emergency fund for a reason, after all, and this is nothing short of an emergency. Sometimes it’s better to clear what you owe instead of keeping money stashed away for a rainy day. All said and done, the money you will stand to save by clearing off your Credit Card debts will be significantly higher than the interest you might stand to earn by simply keeping it in a Savings Account.
- Take out a Personal Loan
While taking out a Personal Loan might sound counterproductive, it might be a really smart financial strategy. Personal Loan interest rates are way lower than Credit Card interest rates, so you will definitely end up paying less money in the end. Besides, you also stand to give a boost to your Credit Rating in the bargain as well.
The Bottom Line
Life often throws curveballs in your direction that can end up disrupting even the best-laid plans. If you are overwhelmed by your current financial predicament, you can always reach out for help by talking to a financial advisor. A financial advisor can help you by reviewing your financial situation and thereon providing free personalized tips for paying off Credit Card debt while ensuring your credit rating doesn’t get hurt either. While using Credit Cards, always have a contingency plan in place beforehand so that you can enjoy a debt-free tomorrow.