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how to manage credit card debt?

how to manage credit card debt?

here are 10 smart ways to avoid compiling credit card debts and how to manage the amount on your card. read more to make smart decisions.
January 26, 2021
4 min read
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owning a credit card is a rite of passage for every consumer. some people get it as soon as they start earning a paycheck. 

some consumers start their engagement with credit cards much later, perhaps due to the stories they might have heard of consumers saddled with credit card debt

it's imperative to understand the nuances of credit card usage. it helps you build your journey as a consumer so that you reap all the benefits while living a debt-free life. 

this article outlines essentials pointers on how to ace this balance and never be bogged down by credit card debt

1. benefits of using a credit card  

many consumers assume that being able to buy items on credit is the main benefit of credit cards. but the benefits go way beyond this.  

building a solid credit history by paying your bills on time works to your advantage when accessing financial products such as loans. 

a high credit score demonstrates your ability to make payments on time, thereby enhancing your creditworthiness. 

another advantage is that you can win reward points and exchange them for consumer goods, travel miles, fuel discounts, and other attractive offers.  

2. choosing the right one  

there is a slew of credit cards available today, and choosing the right one for you is really important. 

credit cards are designed for a wide range of consumers with varying incomes, needs, and goals. hence, finding the ones that suit your lifestyle and income segment is a must. 

for example, going for a premium card while in your first or second job is a surefire way to dig yourself into credit card debt

if you are a frequent flyer, then you might want to get a travel credit card instead of a generic one. so, do your research well. 

identify multiple credit cards suitable for you, then zero in on the one that offers the most perks and value. if you are going for multiple cards, choose ones that offer diverse benefits and rewards. 

3. know your card well 

There are multiple aspects to your credit card. Going through the fine print is extremely important from interest rate, the monthly timeframe for repayment to the rules for usage when you travel abroad. 

Learning about the various fees charged is crucial to dodge crippling credit card debt - almost as much as knowing the card's benefits. 

4. keep these fees in mind  

typically, any credit card is associated with some fees. some fees you should know thoroughly before using your credit card include: 

  • annual charges
  • late fees
  • interest rate
  • your credit limit
  • the foreign currency markup fee when you travel

5. set payment reminders  

to avoid the horrors of credit card debt, you must pay your bills on time. to this end, you can set a calendar reminder a few days before the payment day. 

additionally, you can opt for an auto-debit facility where the amount is directly credited to your card every month. this is possible provided you always have enough money to cover your bills every month. 

cultivating these habits are especially important if you are already in debt and have missed a payment. 

6. which debt to clear first?

if you have two or three cards, it's advisable to pay back the card with the highest interest rate first. known as the avalanche method, it ensures that you spend more money paying off the principal rather than the interest. 

always pay the minimum amount of the other cards until you pay off the card with the highest interest rate first. 

credit card payment
source: photo by paul felberbauer on unsplash

7. tips to pay debt faster  

it's better to eliminate your credit card debt sooner rather than later. one option to speed up the process is taking a debt-free loan from a family member while paying back just the principal amount. 

alternatively, you can negotiate a lower interest rate with them. of course, having a concrete payment plan is extremely important. 

taking on a side hustle is also a good idea. you can turn a passion into a small business, or take on extra gigs with skills like writing, accounting, and fitness, to build an additional pipeline of income to pay it off faster.  

the third step to quickly eliminating your credit card debt is to minimise your expenses and bring them lower than your income. 

8. transferring your debt 

another approach is to consider a balance transfer, which enables you to transfer the due amount to a credit card with a much lower interest rate. 

several banks offer this facility, and some allow you to transfer the dues on multiple cards to a one transfer balance credit card. this brings down your interest rates and streamlines the debt payment process. 

additionally, some banks let you pay in instalments and also do away with any additional interest. you can use an emi calculator to figure out how much you owe the bank and stay on top of instalments.

9. get an accountability partner  

wanting to pay off your credit card debt is a hugely responsible decision that alone deserves a modest slow clap. but the journey is not without obstacles and can be pretty lonely, too.

getting an accountability partner to be with you on this journey is a good idea. find someone you trust and can talk to when you feel demotivated. a mix of empathy and firmness is an added advantage.

ideally, choosing an accountability buddy who is also getting out of debt or is savvy about it is ideal.  

10. celebrate your debt-free life 

paying off a chunk of your credit card debt is nothing short of achieving a milestone. when you are a step closer to your debt-free life, it's time to lighten up and celebrate. 

you need not get an expensive luxury treat that sends you further into debt, though. you can still celebrate in cost-effective ways like making a nice meal for yourself or hanging out with a friend.

build your creditworthiness 

by being a model credit card user, you build your creditworthiness in the market. thus, you can leverage credit cards to save more, experience more of life, and reap some amazing benefits.