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Expert Advice For Cutting Credit Card Debt
You want anything. You just swipe your credit card. This has been going on a while. Now the borrowing has gone beyond limits. You’re stuck in a hole.
“If you find yourself in a hole, the first thing to do is stop digging.”
Will Rogers
How are you going to crawl out of the hole you have dug yourself?
Use the balance transfer :
You can transfer your credit card dues (Outstanding balance) from the credit card in your bank to a new credit card in another bank. The new bank offers you two types of balance transfers.
- Fixed duration balance transfer.
- Lifetime duration balance transfer.
So what is a fixed duration balance transfer?
Your bank allows you to transfer your credit card dues from your credit card to a new credit card in a different bank. The new bank gives you a limited time say 3- 12 months to repay your credit card dues.
Your new bank sweetens the deal charging you a rate of only 8-10% a year on your outstanding credit card dues on the new card.
The actual interest rates on a credit card due (Outstanding balance) can be as high as 30% a year.
Here’s the catch:
You have to make the repayments on the new credit card in time. If you default/delay or fall back on your payments then the bank charges you the usual rate of interest (above 30%).
The lifetime duration balance transfer:
The new bank gives you a lifetime (several years) to repay your old credit card dues in another bank. For the added years (you get many years to repay the old credit card dues) the new bank charges you a high rate of interest (15-25% rate of interest a year).
There is also a processing fee of 1-2% of the outstanding credit card dues (The dues on your old credit card) charged by the new bank.
The new bank makes a DD (Demand draft) in favor of your old bank to the amount of your outstanding credit card dues in the old bank and sends it to your address.
The EMI route:
You can opt for the EMI option where your bank allows you to convert your credit card dues (Outstanding balance) into EMI’s. The rates are much lower at 1.5-2 % a month instead of the usual 3% a month.
You have to make your repayments (EMI payments) on time, otherwise the bank will charge you the usual rate of over 3% a month.
Avail a personal loan:
Your bank charges you a very high rate of interest on your credit card outstanding dues (over 35% a year in some cases).It would be wise to avail a personal loan from a bank and repay your outstanding credit card dues.
The interest on a personal loan can be around 14-20% a year. You do not need to give a reason to the bank (State the use of the loan) when you avail it from the bank. You then pay back the personal loan at this lower rate of interest (14-20%) rather than over 30% on your credit card outstanding dues.
This is a very convenient way to convert high interest debt to low interest debt.
You can put all these methods to use and retire the debt on your credit card.
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