Excessive usage of credit cards without having the ability to repay the due amounts can result in the piling up of debt which attracts high interest rates. The inability to pay off this debt can hurt your financial position significantly besides pulling down your credit score. So, if due to any reason you have significant outstanding balances in your credit card accounts, you should take immediate action to get rid of it.
Here are some tips to do that:
Pay Off the Dues of One Card at a Time
If you have outstanding balances on not one but several credit cards, pay them off one by one. Choose the card with the highest credit utilisation ratio or the highest interest costs first. This will help you reduce your overall credit utilisation ratio and also benefit your credit score.
You can also choose the debt snowball method wherein you pay the maximum amount possible towards reducing the card dues which are the lowest and then move to the next card.
Negotiate for a Lower Interest Rate
Since interest costs enhance your credit card debt significantly you need to find ways to reduce this. What you can do is approach your credit card issuer and seek a reduced interest rate and this is easy if your credit score has been good. You can also update them about the reason for your financial crunch and seek some time to pay off the outstanding dues.
Transfer Your Balance
One way to reduce your credit card debt is to transfer the outstanding balance of the credit card with a high interest rate to another card with lower charges. Although this move allows you to reduce your debt, you need to ensure that you pay off the debt within the period when the lower interest rate is applicable. The transfer of balances will, however, involve a charge.
Convert Payment into EMIs
You can always negotiate with your bank about the grant of an option to pay off all your debt in monthly instalments. This will allow you to arrange the necessary funds without feeling the burden in one go while assuring the bank about your willingness to pay.
Track Your Credit Cards Bills Regularly
When you apply for a credit card check the applicable costs and keep them in mind while checking your monthly credit card bills. This will help you identify any additional charges that may have been imposed by your credit card issuer. You will also be able to identify any mistakes and any fraudulent transactions that may be increasing your credit card bill unnecessarily.
These tips will help you reduce your credit card debt. However, if you are not able to repay it for a long time, you need to go for debt settlement. This involves negotiating with your creditors to accept a one-time lump sum payment that is lower than the total due amount. But this will hurt your credit score and affect your ability to get loans in the future.
It is better to be cautious from the beginning and choose cards with lower costs. Choosing a lifetime free credit card will ensure that you do not have to pay annual charges for using it.