Credit cards offer an instant solution to cardholders with most of their purchases and problems. Almost all banks offer a wide range of credit cards for different needs.

Credit cards, when used recklessly, are a certain one-way ticket to a debt trap. But the same card, if used smartly, can actually buttress your financial needs and afford you that much-needed breathing space as you manage your money.

1. Consider Balance Transfer facility

If you are already caught up in a bad debt cycle, the option of balance transfer or transferring your dues from one card to another is the best option for you.

2. Make a note of all the Debts to be paid

Instead of looking at your credit card bill at once, which is a lot, break it down into smaller parts. This helps you to categorize it. If you hold more than one credit card, it is advisable to pay off the bill which is on priority.

Now how do you differentiate which bill needs to be paid first? It depends on two criteria which is the interest rate of the card and the outstanding bill.

If you have only one credit card and a total bill of Rs.20,000 for example. It is a better strategy if you divide it into 4. This becomes easier if you see and know that you must pay Rs.5,000 instead of Rs.20,000 at a whole.

3. Convert payment to EMIs

If you are finding yourself unable to repay your credit card outstanding amount, talk to your bank and request for converting your outstanding amount into monthly EMIs. Banks, however, charge a monthly interest of 2-3% for allowing the EMI facility. There will be also a processing fee, which will be around 1-2% of the outstanding amount.

4. Liquidate your Investments

This is something you should seriously consider, as should be kept as the last resort. Even though you will be earning interest from your investments, a credit card debt attracts around 36 to 40 per cent interest per annum, which is almost double of what you will earn from your investments.

Hence, experts suggest breaking low earning investments such as FDs to pay off the credit card debt. Breaking off an investment should only be looked at in rare cases.

5. Paying the Card bill with the least balance

Once you pay off the credit card bill with the higher interest rate, you can switch to the card with the least balance pending.

This completely depends on what bills have accumulated and on which card. It might not always be this way. Sometimes, the bill which is the lowest might be with the card which has the highest balance. In that way, you are clearing off two important bills.

Once you are done with clearing the credit card with the highest interest, you can shift to the bill which has the least pending balance. Paying this provides you with a much-needed mental boost of clearing the rest of the bills.

6. Taking a loan to Pay off Credit Card Debts

If your credit card bills are too much to pay off even in installments, there is another option by which you can pay it off at one shot.

If you have a good credit score, you can apply for a personal loan to clear off all your credit card bills at one go. In this way, you can be debt free and will be paying lesser interest. Personal loan interest rates are comparatively lesser than credit card interest rates. Apart from this, depending on the tenure, your monthly EMI will be a nominal amount as well.

7. Pay off debts with the Highest Interest Rate first

This is something which people forget to consider. When you have debts on more than one card, most people would consider paying the one with shorter due date first. Clearly, this is a wrong tactic. Clear off debts on the card that charges higher interest rate first. This way, you reduce your total interest outgo since unpaid dues with higher interest rates accumulate interest faster.

8. Consider opting for Automatic Payment Facility

Since credit cards come with high interest rate and late payment fee, opting for an automatic payment facility is recommended to avoid missing bill payments on time. This way, the bill amounts may get deducted from your account without your manual intervention and you need not worry about missing repayment deadlines even if you are travelling or not having access to your bank.

9. Snowball is another way by which you can pay off your credit card dues

This method helps the cardholder payoff the dues steadily one after the other, therefore easing the repayment burden. This way you can start to clear off smaller dues first.

Note that, clearing balance from a single card can help you improve not only your credit score but also the credit utilization ratio.

10. Top-up loans can also be opted by cardholders

This is for those who have an ongoing existing home loan. Borrowers who have been regular with their home loan for more than 2 years successfully, can go for this option of a top-up loan.

Once you apply for a top-up loan, the bank/loan provider conducts due diligence on the property. Once the loan is approved, you can use the money to pay off your credit card debt. The rate of interest of the top-up loan is close to the rate of interest of the home loan. There is no tax benefit linked with the top-up loan.

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