Financial adaptability, in today’s time, holds an iterating importance. Being able to manage your finances while adapting to the frugality of it is what we are talking about.
One tool that brings along the much-needed sense of adapting finely to finances is a Credit Card. Whilst, it serves as one of the finest ways for everyone to be able to cope up with today’s lifestyle and access the new must-haves of necessity, the tables can turn upside-down leading to a rather scary term ‘Credit Card Debt Trap’.
Now, the question is, how can we get rid of it?
Those who are in the trap know what stress it is!
It starts with one minimum payment option usually and then it gets worse with every EMI.
Well, now, let’s talk about solutions!
1. First, Understand Your Debt Situation
The first step to getting out of debt is knowing exactly what your situation is. You need to gather all your credit card statements and list and define a few things like the total outstanding amount, interest rates for each credit card, and the minimum payments required. This will help you see the whole debt in a clean and clear way and will also help you plan your repayment strategy accordingly.
2. Prioritize & Re-pay High-Interest Debt First
Credit cards usually come with high interest rates, which makes them expensive. One should focus on paying off the card with the highest interest first while making minimum payments on the others. This strategy, known as the avalanche method, helps you save money on interest and clear debt faster. Always best to go one card at a time as you will be able to pay on-time for one card at least, and that too the high-interest one.
3. Consider Debt Consolidation
One of the best ways to manage multiple credit card debts is through debt consolidation. This involves combining all your debts into a single loan with a lower interest rate which makes payments more manageable. Trusted agencies like FREED specialize in debt consolidation and can help you simplify your repayment process while reducing financial stress. Considering debt consolidation from professionals is a perfect option for those who find it overwhelming to restructure their finances to become debt-free by themselves.
4. Use the Snowball Method
If you want to be motivated & feel relaxed, the snowball method is a great option. While the avalanche method suggests focusing on clearing high-interest debt first, in the snowball method you start by paying off the smallest balance first. It’s not the vice versa, as this method goes by the balance and not the interest. The psychological win of clearing smaller debts keeps you motivated to tackle the larger ones.
5. Negotiate with Creditors for a Credit Card Settlement
Many people don’t realize/aren’t aware that they can really negotiate with credit card companies. Yes, if you’re struggling to pay your balance, hire a debt relief agency and they will negotiate on your behalf in the best possible way for a credit card settlement. In some cases, creditors may agree to lower the outstanding balance or reduce the interest rate. Either way, it will be easier for you to clear the debt.
6. Cut Unnecessary Expenses
Go with the basics! Be Frugal! Take a deep analytical look at your monthly expenses and identify areas where you can cut back. Even the smallest cuts would be great. Count how much you have saved by cutting back and using the saved money towards your credit card payments. Small changes like cooking at home, canceling unused subscriptions, and avoiding impulsive purchases can free up cash for debt repayment.
7. Look For A Passive/Side Income
Boosting your income can speed up debt repayment. We know it’s not easy but your efforts can make a change. Consider taking up freelancing work within your skill set or look for very basic online work like writing. You can also try to have a word at your workplace regarding extra pay for overarching the targets. Every extra penny you make can go towards paying off your credit card debt faster.
8. Switch to Cash or Debit
It is very important! If there is any chance, try to not use your credit cards until you are out of the debt trap. One of the best ways to prevent future debt is by switching to cash or debit cards for everyday expenses. This ensures you’re only spending money you actually have, rather than relying on credit.
9. Seek Professional Help
If your debt feels overwhelming, consider speaking with a financial expert. Debt relief agencies, credit counseling services, and financial planners can offer tailored solutions to help you get out of the debt trap.
The ‘Credit Card Debt Trap’ is indeed a scary phase to be in but there is always a way out. It is good to learn financial management and equally wise to get help from professionals.
