Some may argue that escaping credit card debt is not possible, but what do you do when you don’t want to end up burdening yourself with it? Many card companies make endless promises about how you can remain free of any debt with a credit card. Sadly, that is nothing more than a white lie.
Finding yourself in an overwhelming amount of credit card debt is not a novel occurrence. Find out some facts about credit card debt below which you may have possibly missed out on and this may also give you an idea on how to get out of debt.
What Did You Never Get To Know About A Credit Card Debt?
It Is Possible To Stay Free Of Any Debt?
Can you imagine a situation where you use a credit card, but stay free of any debt? Yes, it is entirely possible, and you can use this feature to your advantage. Want to know how?
It’s quite simple! Just avoid spending and charging anything on your credit card that you cannot pay for later. Your credit card should be a payment tool and not something that you use to collect debt on your head.
Unless you fix this concept in your mind and let it guide you, there is a high chance that you may end up collecting huge amounts of debt over time.
Understand That Your Credit Card Makes Sense For A Short Term Loan
Sure, a credit card can cover up expenses for the times when you cannot pay for them immediately. A cash crunch or pressing expenses can make you feel the need to use your credit card and complete certain payments. It is a prudent decision to use your credit card in times like these.
But what you need to understand is that this decision is a fine one only as long as the repayment time frame is a small one. So let’s say that you finance something through your credit card for a span for four months. That might be okay because the finance cost for this time frame will be a small one.
If, however, you are using the same credit card to finance something for a span of a year or two, you are going to incur a hefty charge on it, and that will only add to your overall debt.
It Is Easy To Owe Something But Difficult To Really Pay Back!
You will be surprised at how easy it is to slip into a debt trap. Overcharging can be a temptation when your card limit increases, but so does your interest and payment obligation. In the future, you may not have sufficient funds to settle your obligations and exhaust your liabilities.
Your Debt Affects Your Credit Score
Just know this that if you are going to be holding a high amount of negative balance on your head, it is going to impact your credit score adversely. This is reason enough why you should not let your debt value surmount to an all-time high.
Usually, maintaining an account balance up to 30% lower than your credit card limit is a good way to ensure that your credit score remains up. As already said, credit should be utilised only if you really need it. Keeping it close to zero is an excellent strategy to avoid piling up debt and keeping your credit score high.
Falling behind on your payments is another blunder that you must avoid making. Not only does it impact your credit score negatively, but also amounts to collecting a debt.
Always Have A Repayment Plan At Hand
Sometimes, a mere commitment and a plan can be of much help if you are trying to get yourself out of debt. With your own will, you can limit your expenses to those things that are absolutely necessary and keep idle cash, in case you need to emerge from a strange situation of debt. If you are neck-deep in debt, sometimes it doesn’t hurt to ask if your lenders are willing to lower your interest rates.
If you have collected a heavy debt on your head, it’s a wise idea to suspend putting any additional charge on your card. Instead, focus on repaying what you already owe.
Ask For Help If Needed
At times, credit card companies do accept your request to lower the monthly deposit that you are required to pay. If you find yourself backed up in a corner, unable to make payments towards the amount you owe, asking your lenders for help is certainly worth a try.
Settle With Caution
If you are in huge debt with your credit card company, you will have the option to settle for an amount that’s smaller than what you owe them. However, it is best to talk through this on your own, since taking the service of any company might only put you under additional charges. Your credit card company may impose certain restrictions or terms and conditions on such settlement, but it is a good idea to seek this aid if it works in your favour.
Legal Repercussions Can Be Real
Although no one will put you behind bars for not being able to pay your credit card bills, there can be severe consequences of non-payment towards your dues. The quantum of the same will be determined by your credit card lenders, but it is a good idea not to put yourself in a situation where you have to face any such consequences.
These are a list of key details you must know about credit card debt. An obligation to pay can look like a distant dream but can become very real in no time. If you want to avoid falling into a debt trap, it makes sense to follow these tips and shield yourself from the ill-effects of a credit card debt.
Always assess your need to get a credit card before actually getting one. You can use CRED to pay your credit card bills online and it will also help you keep track of your expenses and avoid a situation in which you find yourself in endless debts.
Raj Kumar is a qualified business/finance writer expert in investment, debt, credit cards, Passive income, financial updates. He advises in his blog finance clap.