Are you facing trouble getting your credit card debt-free? If yes, don’t curse yourself about it – you are merely one of the thousands of other consumers who feel the same. However, once you choose to change the way you spend on the Credit Card, it is possible to make your credit card balances manageable.
The below mentioned mistakes, if avoided will help you stop adding to your existing credit card debt and start giving you control over your spends.
1. Pay More Than The Minimum Amount Due
It’s very tempting to pay only the Minimum Amount Due every month (often Rs.250 to Rs. 500) and postpone the remaining amount to the next month when you’re under financial crisis. Trust Me, The Next Month Never Comes. My advice here is â€œNever Do Itâ€.
I will tell you why. Not only will you never pay off your bill, but the interest rates that credit card companies charge will add to the balance every month. Instead, pay as much as you can as payment if you cannot afford to clear the amount. Wherever possible, try reducing unwanted expenditures to focus on paying off the credit card dues. It will be well worth going without any extras like dinners at your favorite cafÃ© or shopping unnecessarily when it can help you sleep easier in the night knowing that you will soon be free of debt.
2. Don’t Use Credit Card for Day to Day expenses
Except in justifying circumstances, you should have your budget under control so that you can at least pay for your monthly expenses with your monthly income. By keeping daily purchases like groceries and utility bills off your credit card, you’ll be taking a major step in the right direction to getting your spending under control.
3. Beware of Credit Card “Rewards”
The reward points that you earn from credit cards, are not any worth if they surrender you to the extra interest rate because of the purchases that you made in order to earn the reward points and then are unable to make full payments. The credit card reward schemes that allow you earn points on your credit card purchases, if calculated often come out to an effective reward of 2% or less.
For example, I get one point for each Rs. 100 spent on my credit card, but you must have at least 500 points to redeem the points, which means that I have to spend at least Rs. 75,000 to accumulate those points. Because the amount of interest that is charged on outstanding account balances exceeds the 2% bonus that you receive, it may not be any worth to incur the interest charges for such a small reward.
4. Never use your Credit Card Overseas
For every overseas purchase you make you could be subject to an international transaction fee and a lousy exchange rate. So, even if you are the perfect credit card customer and pay your bill in full and on time, certainly the card issuer is making money out of you!
5. Never take the Cash Advance Facility
Credit card companies employ many tactics to pull money out of your pockets and providing the Cash Advance facility is one of them, which gives you the freedom of withdrawing Cash on your Credit Card from an ATM. The main reason why taking a cash advance should be avoided is that you start accruing interest the minute you take out the cash. Unlike regular credit card purchases, there is no interest-free period offered on Cash Advance.
The credit cards companies will also send you a pin number shortly after you receive the card so that you can use your credit card to get cash from an ATM. This PIN is also sometimes needed for registering and managing your card online. But trust me, what I did with this PIN was that after registering my Credit Card online I shredded the PIN and threw it in the bin 😀
6. Do not apply too many credit cards
If you already know that you are not good at managing credit cards well, don’t give yourself more enticement in the form of more cards. It is also possible to miss payment deadline when you try managing more cards which have different billing cycles and different due dates.
7. Avoid Late Payment Charges
Late payment charges are another source of income for the Credit Card companies and also subject you to additional interest charges. At least, if you cannot afford the full payment, pay the minimum Amount Due and Avoid late payment charges. (Doing this, always keep the Point No.1 of this article in mind)
8. Never Ignore Your Debt – You have to clear it
People become tensed or embarrassed by their credit card debt that they simply stop opening their bills and pretend that the problem isn’t there. This is like fooling yourself. The debt is in your name and whatever be the reasons, you are the one who has to clear them. In addition, while you’re ignoring your bills, interest rates are causing the balance to grow each day. Also, missing on your payments may get you in the CIBIL Defaulters’ list and affect your credit score.
Ignoring your debt can also spur the recovery departments into action, and lead to harassment with the unsavory tactics some collectors are employing these days.
Cleaning up your credit card debt takes time and self control, but the steps outlined here aren’t difficult. There’s no reason that credit cards can’t be a helpful and a convenient tool – assuming that you can learn to use them sensibly and responsibly for your own welfare. These tips will help you keep control of your cards instead of letting them control you.
What is the strategy that you follow when you use your Credit Card? What are your views regarding the points listed above. Please mention below if I missed on any important Point that you would like to be shared with the readers.