How to effectively manage Credit Card Debt in India!

No longer are credit cards limited to the high income bracket population in India. The Indian population is now amassing credit card debts and ‘reward point’ strategies of banks. If you have a credit card debt in India, here are a few tips to keep in mind to reduce your debt.

These tips to reduce credit card debt are aimed to inform and educate the budget conscious spender about how credit card debt can spiral out of control.

Don’t use your credit card to buy groceries

Do you have a budget for your groceries every month? Then we recommend that you stay away from using credit cards to shop for your groceries because if you use your ATM Debit card or cash, you will have better control on how much you spend. You will also be able to tell instantaneously if you are within your budgets and if you aren’t, you can cut down on spending elsewhere immediately.

Make big purchases on your credit card, but only if you have the capacity to repay in time

If you’re thinking that this is common sense, think again. Many of us make big purchases like airline tickets if we see a good deal online from our credit cards. Will we be able to pay it off? "Oh I will manage it in the coming months" is what many would think.

You better be able to manage this hefty credit card debt, or else you will end up paying 15-20% interest on your credit card debt in India. Ouch! And I am not even talking about other finance & service charges which in itself are quite huge!

Manage your credit card debt by saying no to cash advances

Cash advances on credit cards in India attract an interest rate of 2-3% per month along with transaction fees.

Is it really rocket science that it is best to stay away from cash advances while dealing with credit card debt in India? Unless you are faced with an emergency, look for other borrowing options if you are cash strapped.

Most banks offer loans against FDs which are a popular choice among those who want to borrow money without breaking investments or attracting a hefty interest rate on cash advances with credit cards.

Be a smart customer – convert your credit card debt in India into a loan

If you have a credit card debt that you are unable to pay off in the near future, you may want to talk to your bank or service provider to allow you to convert your credit card debt into EMIs. Credit card issuers may offer EMI facilities to customers who are unable to pay off their credit card debts. But this option may not be the cheapest as it attracts processing fees and other conditions.

Don’t roll-on your Credit

This probably is most important of all – If you have money, try to wipe out as much as you can from your credit card dues. Never get caught in the lure of paying 5% minimum due and rolling on the credit to next month.

Nothing beats the interest rates, finance charges & other overheads charged by Credit card companies. If you keep paying that minimum due, your principal amount will never reduce, it will only increase!

Watch out for the dodgy websites

Credit card frauds are rampant and we read about them in the newspapers every now and then. But the thought of "this will never happen to me" often gets the better of us when we make online purchases from our credit cards. Make sure that you verify the authenticity and security of the website before you give any credit card details. The last thing you want is to be faced with the complication of credit card while you’re trying to figure out how to manage your own credit card debt.

And please remember, most agencies in India have started using the Credit rating system as it is in Western countries. Do not default on your payments at any cost, or you will have a lot of head-aches while procuring a loan in future!