Credit Card Debt

Effective Ways to Manage Credit Card Debt


Credit cards are being considered as one of the vices of the modern world. There are many instances of consumers having huge debt simply because of not managing their credit card usage wisely.

What are Credit cards?

Credit cards are small plastic cards issued by financial establishments like banks, allowing the holder to use borrowed funds for online and offline purchases/transactions. This borrowed money can be used as and how the consumer wishes – from buying flight tickets to jewellery to daily needs substances. Credit cards usually have an upper credit limit and a grace period. If you are able to pay back the money within the grace period (usually 25-30 days), no interest is charged. However, if you default in payment, there is a high-interest rate that is levied on the amount borrowed.

If you are in a debt soup thanks to credit cards, don’t worry much. It’s definitely not the end of the world. Just prudent usage of the cards and managing the outstanding amount can get you out of this mess.

Here are some ways to help you find your way through these murky debt waters

  1. Balance transfer and EMI facility

You can look to transfer the existing balance to another card or consolidate multiple credit card debt into one card. This is effective only if the new card gives you an interest-free period, thereby providing temporary relief to you, helping you regroup your finances and strategize.

Another way is to convert your outstanding amount into EMI’s.

  1. Pay more than the minimum amount and pay-off debts with higher interest rates first  

Many credit card holders are under the impression that paying the minimum monthly amount is safe and good enough. However, it’s just a small interest amount being paid off and the effective annual interest on the outstanding amount keeps getting accrued. Also, it’s preferable to pay off card debts that have higher interest rates.

  1. Consider an instant personal loan to consolidate your debt

Another option that can be looked at is taking out an instant personal loan, which are basically unsecured loans that come with lower interest rates than credit cards. Conventionally, personal loans come with lesser interest rates than credit cards – the difference is actually quite massive (while credit cards come with an annual interest rate of about 40%, personal loans come with an annual interest rate of just about 12% – 14% p.a. – so much for difference, really!). You can take a loan and pay off your debts in one go. However, the downside is that your credit score might not be ideal for such a loan from banks. Fintech companies like Qbera that offer instant personal loans to individuals with low credit scores can be life-savers.

  1. Know your billing cycle and consider the automatic payment facility

Knowing the billing cycle helps you make the best possible use of the interest-free period offered by the card. High-Interest rates and late payment fees are applicable for payments that aren’t made during the interest-free period (although the late-payment fee is levied in light of non-payment before the due date). Knowing this, you can consider an automatic debit facility offered by your bank for better debt management.

  1. Limit the number of credit cards and track your bills periodically

It’s quite difficult to keep track of purchases and expenses made through many different credit cards with different dues dates, interest rates and diverse facilities. So, a wise thing to do here is to limit the number of credit cards with an ideal number being one or two at the maximum. Also, do review your bills occasionally to check for discrepancies or miscellaneous charges levied by banks. It is also helpful in quickly detecting fraudulent transactions if any.

Once outside the mess, it is very easy to slip and fall back into this vice so be very meticulous with your expenditures.


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