Credit Card Debt: In today’s era, credit card usage is no longer limited to urban areas; now it has expanded to rural areas also. Many companies offer credit cards for free, and if you spend up to a certain limit, the annual fee may be waived. However, these perks and the allure of reward points have led to a surge in credit card debt, trapping many people. So, how do you escape this situation? And why do people fall into the trap of credit card debt? Here’s all you need to know:
Also Read : HSBC Bank Launches Live+ Credit Card With 10% Cashback On Food Expenses
How do people fall into credit card debt?
Credit cards have become a status symbol in today’s society. While they offer numerous benefits, they also come with significant drawbacks, especially the high interest rates. For instance, personal loans typically have interest rates ranging from 10-16 per cent, depending on your credit score. In contrast, credit card interest rates can reach as high as 30-42 per cent.
Who gets trapped in credit card debt?
People often get into trouble with credit card debt by overspending and failing to pay their bills in full. Some mistakenly believe that paying a portion of the bill will only incur interest on the remaining balance. However, if you don’t pay the entire amount, interest is charged on the full outstanding balance. For example, if your bill is Rs 50,000 and you pay Rs 40,000, you will still owe interest on the entire Rs 50,000. With rates as high as 42 per cent, this can amount to significant additional costs, including late fees, over time.
How to get out of the credit card trap?
1. Limit Credit Card Use and Consider a Personal Loan
If you’re struggling with credit card debt, the first step is to reduce your credit card usage. Pay off your outstanding balance as soon as possible, even if it means taking out a personal loan. Personal loans usually have lower interest rates (around 12-14 per cent) compared to credit card debt (30-42 per cent). By securing a personal loan and paying off your credit card balance, you can save money and pay off your debt in manageable installments.
2. Convert Your Debt to EMIs
Another option is to talk to your credit card company about converting your outstanding balance into Equated Monthly Installments (EMIs). For example, if you owe Rs 100,000 and can’t pay it off in full, you can opt for an EMI plan. This way, you won’t have to pay the high 42 per cent interest rate and can instead manage your payments more effectively.
Also Read : Credit Card Spendings Via UPI Platform Touch New High –Check List Of Banks Offering Facility
While credit cards offer many advantages, a small mistake can lead to significant problems. It’s essential to be mindful of your spending and only charge what you can afford to pay off. By being smart and strategic with your credit card usage, you can avoid falling into debt.
