Credit Cards are great financial tools. They empower you with financial convenience and flexibility, but as you may already know, no power comes without responsibility. So, if you’re currently at the mercy of a bad Credit Card debt, the card is not to blame – the culprit is definitely irresponsible credit use.
If you’re facing issues with mounting Credit Card bills, don’t panic; here are some things you can do to gradually improve your debt situation.
Never take debt to clear a debt
This one’s a no changer. If you’re already having trouble managing your debt, do not make any more Credit purchases. This is also probably not the best time to take on new loans, because you’ll just end up adding to your existing debt. It’s like eating a whole bucket of French Fries after a workout; you’ll end up nullifying the effect of your own progress.
Good Debt & Bad Debt
Differentiate your good debts from the bad ones. Wondering how? It’s simple, really. Good debts are those that are in connection with an asset you own; these are healthy because you are investing in something and have been paying on time. On the other hand, a bad debt is something that you’ve brewed up due to negligence. For example, not paying your Credit Card bill will invite interest fees and make future bills look even more daunting. It’s clear to say that bad debt mainly comes into the picture when you’re not managing credit well, so it’s all in your hands.
Pay More Than Your Minimum Due
The automatic minimum due option works well for Credit Cards when you don’t have too much of a debt problem. However, when your debt looks scary, minimum payments won’t quite cut it. Try and see if you can clear bigger amounts every month so that you inch closer towards freedom from a bad debt.
Find Additional Income Source
Another way to ease the pressure of bad debts is to put your skills to use and generate extra income. If your skill set has a good demand for freelance projects, pick up a couple of odd jobs and channel all your new earnings towards clearing your debt.
Just because you’ll be earning more during these periods, don’t get tempted to spend more – that’ll defeat the whole purpose.
Address The Bigger Problem
Let’s say you currently own two to three Credit Cards. Identify the one that’s leaving you in a bad debt situation; that’s the one that needs the most attention. While you don’t want to neglect the other two cards, you want to distribute your repayments. This can be better understood with an example. Let’s say Card A’s outstanding amount is Rs. 15,000, Card B is at Rs. 12,000 and Card C is at Rs. 45,000. The former two can still be managed with small payments, whereas Card C needs extra attention and more funds towards clearing off.
Read and understand Your Credit Report
A few years ago, we really didn’t have access to useful insights from our credit reports, but today, you can not only get your credit report and Credit Score for FREE but also monitor them regularly.
Your credit report will contain useful insights into the various factors that affect your credit health. By reading your report regularly, you’ll be able to track how every good step is helping your credit situation, and this will give you the direction and motivation needed to focus on your debt-crushing mission.