Look, there are two perspectives to see everything – I filled some water in a glass and showed it to different people, and when asked what they see, some said it’s half empty, and some said it’s half full! Similarly, credit cards can also be seen from two perspectives!
I have 2-3 credit cards for almost 16 years, among which I mostly use the City Bank reward card and the Indian Oil credit card. With Indian Oil, you earn rewards points that can be redeemed for the equivalent value of petrol or diesel, along with free movie tickets, airport lounge access, and other benefits.
The point is, if you use credit cards wisely, it can be a boon for you, otherwise, it will trap you in debt!
To get out of credit card debt:
If you are stuck in the trap of credit card debt, first strategize and follow these things –
Credit Card Balance Transfer (Transfer balances from multiple credit cards to one) – Many card issuers offer the option of balance transfer to existing holders of other credit cards. This allows you to transfer unpaid balances to another credit card issuer at a lower or zero interest rate for a specified period, usually up to three months. It is also known as a promotional interest period. After the promotional interest period ends, credit card issuers start charging normal finance charges on the remaining transferred amount. You can choose the balance transfer option to manage your credit card bill properly. Some credit card issuers also allow converting transferred balances into EMI.
Explore alternative credit options – When using a credit card, you can also benefit from personal loans, top-up home loans, and gold loans to get out of debt. Interest rates on these loan options are usually lower than the interest rates charged on credit card EMI transfers. Lower interest costs can increase the likelihood of getting rid of your debt trap.
Convert outstanding balances into EMI – Many credit card issuers offer the facility to convert your outstanding balance into Equated Monthly Installments (EMIs). This way, you can pay off the total amount in smaller installments over an extended period. Most banks charge an interest rate for converting your outstanding balance into EMI, which becomes a part of your EMI. The interest rate on EMI is generally lower than the finance charges on the outstanding balance. This interest rate can vary depending on the period you choose for repayment.
Take a personal loan at a lower interest rate – You can take a personal loan to repay your credit card debt. Personal loans typically have lower interest rates compared to the finance charges on credit card EMIs.
Common Mistakes to Avoid with Credit Cards:
Avoid cash withdrawals – In tough times, you can withdraw cash using a credit card. However, this comes with hefty charges. Cash withdrawals on credit cards attract high fees and usually don’t have any interest-free period.
Don’t exhaust credit limits – Never fully exhaust your credit card’s limit. Banks consider those who spend their entire limit at once financially weak. This can affect your credit score negatively. Avoid using more than 30% of your credit limit.
Avoid international transactions – Credit card offers often entice people to use them internationally. However, be cautious as foreign transactions attract foreign currency transaction fees. Using a prepaid card instead of a credit card is better for international transactions.
Minimum Due Payment – Credit cards have two types of dues – Total Due and Minimum Due. Paying only the minimum due will not save you from hefty interest charges. Always pay the total due amount to avoid high-interest costs.”
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