What Do You Need to Know About Credit Card Debt Elimination?
Credit cards are one of the most expensive types of debt. It comes with a high interest rate, which explains why most people struggle to repay it on time. If you are also struggling with credit card debt, know that you aren’t alone.
With interest surging to 20%, many debtors face financial challenges to keep up with their payment plans. Fortunately, there are ways to eliminate credit card debts.
Overview of Credit Card Debt
As tempting as the idea of making purchases with credit card sounds, it can accumulate a significant amount of credit and affect your CIBIL score. Using it responsibly can help you make large purchases and improve your credit score. After all, cash alone is often not enough to invest in your financial goals or make big expenses. However, credit cards come with their share of risks.
It’s important to clear the outstanding balance on your credit card bills to prevent interest or fine due to late payments.
Importance of Eliminating Credit Card Debt
Credit card debt carries a significant financial burden. As the debt accumulates, the interest keeps increasing, making it financially difficult for you to clear the balance. You need a solid budget and a repayment strategy to get out of your credit card debt. Reducing your expenses or allocating a large portion of your income and savings to the debt repayment can help.
How Credit Card Debt Accumulates
The most obvious cause of the credit card debt accumulation is spending more than your earnings. If you have the habit of overspending, you might soon find yourself in credit card debt. Likewise, not paying your credit card bills or paying too little, yet spending too much can accumulate credit card debt. However, this debt can be easily avoided by setting a budget and monitoring your spending.
Methods of Credit Card Debt Elimination
With the right repayment strategy and a proper budget, you can repay your credit card debt easily. Let’s check out a few common strategies that may work.
Debt Snowball Method
Debt snowball method motivates you to clear your debts as fast as possible. You start with the lowest amount and clear the lowest debt before moving on to the bigger ones. It’s simple. Prioritize the debt by its size, i.e. smallest to biggest. The goal is to keep making progress by paying off smallest debt first, and the next smallest debt, and so on until you have paid your credit card debt in full.
Debt Avalanche Method
This one is similar to the snowball method, except that you prioritize debt with the highest interest first. This prevents interest accumulation and helps clear your dues faster than the snowball approach.
Balance Transfer Credit Cards
The 0% balance transfer credit card comes with an introductory period of 15-18 months. During this time, you get interest-free repayment plan. You can transfer your balance from all credit cards to this one credit card account and pay once instead of repaying different bills with interest.
Long-term Strategies to Stay Debt-Free
Track your spending and stick to your repayment budget always. Talking to the creditors also help sometimes, especially if you have been unable to repay your debt because of a serious illness, unemployment, and other financial emergencies. They might be willing to negotiate the repayment term.
If you are stuck with excess debt, consider filing for bankruptcy. The bankruptcy chapter 7 can help discharge your unsecured debt while the chapter 13 allows you a period of 3-5 years to clear your debt with a court-mandated repayment plan.
Eventually, you will need to manage your living expenses to spend more on your credit card debt.
