A simple measure to clear off your credit card dues on time

A credit card is one prudent financial investment to make daily payments and access your credit instantly. Moreover, it provides various advantages in the form of discounts, cash backs, no-cost EMI and lifestyle linked advantages. However, remember that if you spend over your repayment capacity through credit card and fail to repay your outstanding credit card bills within time, you hold the risk of landing into a debt trap. 

Here are a few of the mistakes that credit card users make that usually land them into a credit card debt trap. Alongside, ways to clear off your credit card dues are also mentioned: 

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Not paying the entire credit card outstanding bill by the due date

Issuers of credit card charge hefty finance charges, which ranges between 24 and 52 percent p.a. on the unpaid amount of the credit card dues. Also, the issuers get the benefit of a grace period or interest-free period on all new credit card transactions until unpaid bills are completely paid. Thus, the non-repayment of an entire outstanding credit card due for numerous consecutive months combined with constant card transactions during the period makes your debt on the credit card grow fast. 

A prudent way to witness such events is to avail of the EMI conversion route, which is an option available by all card issuers. The time credit cardholders understand their inability to repay the entire outstanding due, and they should consider converting such an unserviceable constituent of their dues into EMI. The option of EMI conversion comes at a lower rate of interest than finance charges incurred on unpaid dues. The repayment tenure of the EMI conversion usually ranges between 3 and 60 months based on the card issuers. This allows the cardholders to choose their EMI tenure based upon their capacity to repay their EMI. Also, the card issuers allow the card users to convert a specific transaction that is beyond a specific threshold into easy EMIs. Remember that once credit cardholders convert their entire unpayable bill into EMIs, a revoked grace period or interest-free period is enacted, which permits users to get the benefit of an interest-free period on all their new credit card transactions. 

Just paying the MAD or minimum amount due by the due date.

Due to insufficient awareness regarding credit cards, many of the existing and new credit cardholders incorrectly think that only repaying the minimum amount dues as stated in the credit card statement can save you from hefty finance charges. However, paying only the MAD saves you from repaying the late payment fee of just up to Rs 1,300 and any decrease in your credit score. You continue to incur the finance charges on credit cards outstanding, which are not paid.

Using a credit card to withdraw cash via ATM

Credit card issuers generally charge card users finance charges or interest rates on making any ATM cash withdrawal on using the credit card. Moreover, they also charge cash withdrawal charges of up to 3.5 percent of the amount withdrawn. Remember that the credit card holders continue to incur the heavy finance charges of up to 52 percent p.a. till they completely pay the entire withdrawn amount from ATMs. Thus, all credit card users must not choose the option of ATM cash withdrawal through the credit cards for cash. In situations when conducting ATM cash withdrawal through the credit card is unavoidable, ensure to pay the entire cash withdrawn amount as soon as possible. 

Not choosing the no-cost EMI option for mitigating the big-ticket buys.

When you make the big-ticket buys, some of the credit cardholders might just swipe their cards and avoid the option to avail of no-cost EMI. Doing this may make you liable to repay a huge ticket amount by the upcoming due date. Failure to do this makes the credit card holders incur finance charges on unpaid bills with a late payment charge on the missed MAD (minimum amount due). Instead, choose the no-cost EMI option, which is a better choice available on almost all credit cards. The no-cost EMI choice is nothing but a variant of the merchant EMI, wherein the interest cost of the EMI is borne by the merchant or manufacturer, and the buyer of the service/products needs to only repay the purchase cost as EMIs. However, note that the GST on the interest component must be met by you. Few issuers also offer additional discounts or cashback facilities to their users on such buys through the scheme of no-cost EMI based on the tie-up with the merchant. Thus, if you are looking to make a big-ticket purchase and do not have sufficient repayment capacity, you can choose the no-cost EMI option on such products. 

Remember that selecting the no-cost EMI option also allows you to make your repayments of the buying cost of goods in the form of EMI based on your repayment capacity without the requirement to incur any finance charges. 

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A crucial tip to exit the credit card debt trap

The option to choose the EMI conversion must be your first response to save yourself from such credit card debt traps. However, you, as a holder of a credit card, also can explore other important options if the interest rate charged on the credit card EMI conversion option is on the higher side. 

Here is an important choice:

Look out for an alternative loan option: Various loan apps today like Cashbean, Earlysalary aim to provide personal loans. Personal loans from such loan apps can be availed to get rid of the credit card debt trap. The rate of interest (ROI) charged by the lenders of these loan apps usually is lower as compared to the EMI conversion interest rate. Thus, if you are charged a higher interest rate on the EMI conversion option, you can choose a personal loan as an alternative option to reduce your interest cost. A reduced interest constituent can increase your chances of exiting the debt trap faster.


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