Struggling with Credit Card Dues: 5 Ways Can Bail Yourself Out

Over the years, plastic money in the form of credit cards and debit cards has gained precedence over cash. Mainly, the convenience of ‘buy now, pay later’ has made it more popular among consumers. Even though credit cards have fuelled our consumer-driven lives. Often, because of credit cards, we exceed our spending power and end up struggling with credit card dues.To ease out the borrowers during the COVID-19 crisis, Reserve Bank of India (RBI) has introduced the moratorium facility for term loan borrowers and credit cardholders. Though this is a temporary relief from your credit card bill, you may still have to pay around 40% interest per annum interest on your outstanding.But these five ways will help you manage your credit card dues and save you from shelling out hefty interest.

Stay away from using credit cards on your big purchases such as furniture and home appliances as you may later feel the burden of outstanding dues. A better option is to opt for a loan with 12-28% for a tenure of 3 to 48 months. Converting big-ticket purchases into EMI is better as compared to transferring these costs onto your credit card. EMIs shall divide your outgo into smaller affordable portions and shall reduce the risk of default.

Your credit card dues can be converted into EMIs to relax the financial strain. However, banks will charge a marginal processing fee on the outstanding amount and monthly interest on the EMI facility. You can select the tenure of your choice.

If you are grappling with the outstanding dues on one of your credit cards, the balance transfer option allows you to transfer dues to another card. With this transfer, you gain an interest-free period of up to six months. You can use this relief window to conveniently clear your credit card dues.Regular interest rate is applied once the interest-free period ends. Though check the processing fee, interest rate and the interest-free period of various cards before deciding on balance transfer.

Usually, banks charge a whopping interest rate of approximately 40% on your credit card dues. This is roughly double the interest paid on fixed investments like bank fixed deposits, bonds etc. Usually, these investments generate low returns of around 6% to 9%.You can break your fixed deposit or such low-outcome investments to clear your credit card dues rather than dealing with the heavy interest on non-payment of dues. However, be cautious not to exploit this option as it may leave you with depleted savings.

If you have been regular at paying credit card bills in a timely fashion, you will be eligible to a pre-approved loan against your credit card. You can clear your credit card dues with a pre-approved loan that offers instant loan disbursal and flexible repayment options.The loan tenure is usually between six months to five years and the interest rate is between 12% to 29% per annum depending on the credit card user and other financial parameters. The loan can be a convenient option to avoid the huge interest on credit card dues.To sum it up, the inability to pay the credit card outstanding reflects your overspending habit. The above steps are helpful in effectively tackling your credit card dues. But your primary step to avoid overflowing dues should be to smartly use your credit card/s and curtail avoidable purchases on credit cards.

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.