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How to pay of Credit Card Debt: 6 Steps

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Modern day financial systems rely on a structure that gives a line of credit to users based on their ability to make payments; often out of future earnings.  Thus, it is common practice for credit card holders to spend high, leaving the payment of the outstanding credit amount to future income or earnings. This could at times see the card holder spending more than what he should normally be doing.  Most people spend in the belief that there would be an increase in future income or that there is a readily available credit limit still on the cards.  At times, the credit card amounts would take up the entire earnings of a person just to keep paying the least money to roll over the line of credit.  With a significant amount of credit card holders facing some payment issues at some time or the other, laid out below are some basic norms to be followed to get out of an indebted situation.

Pay in larger installments and clear the dues 5-6 months

Instead of paying just the bare minimum to be paid each month, break up the total outstanding amount into four or five installments, to be settled one at a time each month.  Although just the minimum amount would keep the creditors happy, remember it comes at a high price and most card issuers end up with annualized interest rates of close to 40%. pa

 

  1. Utilise FD:  In case you have run up a big hefty credit card amount, it would be wise to break up some liquid source of income, say a fixed deposit or an investment in some equity or so.  The high interest rates that most card issuers charge would make it advisable to close out any outstanding credit card amount at the very earliest.  This could well end up costing the customer a good 2%-3% lesser on interest rates. 

 

  1. Get personal loans at lower rates to pay off credit card dues

 

  1. Interest charged on credit cards are usury, that means you will have to pay high interest  on the amount of credit taken.  If possible, it would be advisable to take a loan at much lower interest rates to pay off the credit card balance.  Most personal loans and loans that are offered by the financial institutions on gold as security would work out cheaper than the high interest rates charged by credit card issuers.

 

  1. Ask  for loan from friends and relatives

    1. Take a loan from friends and families to pay off the outstanding amounts of credit cards. At times, most employers would give an advance on a salary that could be used to pay off the credit card payments.  It does indeed help to have friends and relations that could be counted on to bail you out in times of need; the sum comes at zero interest.

 

  1. Request Credit card issuers to set EMIs for the due amount

    1. Most credit card issuers allow the outstanding amount to be converted to EMIs.  These can be suitably timed from 3 months to up to 3 years, thus leveling out the cash out flow or obligation.  Most interest rates charged on EMIs are lower than the high charges that credit card companies charge their clients; the customer could well save up to a good 5%  per annum on outstanding amounts.

 

  1. Get a new credit card

There is, a credit transfer facility that most card issuers offer their clients.Here, a new card is issued to the customer and the entire credit amount transferred to the new card. when a new card is issued, there would be an period that applies to the new card for a few months at the very beginning.This can at times be helpful in reducing the payment that most debtors have to pay.

All said and done; it is always advisable to live within means.  There are a whole lot of credit card issuers that thrive on the hard earned money of the customers.  After all, in the final count, it is the customer’s money that is at stake.

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