Everyone seems to want to assist you in paying off your credit card debt. When you’re already in trouble, there are a lot of businesses eager to assist you, but who is there to assist you in figuring out how to avoid it? Additionally, how can you make it happen if you have a busy family juggling job, school, and the shuffle of extracurricular activities?
The truth is that it’s challenging to stay debt-free, even for the most well-organized, money-savvy households, because occasionally life occurs, or we lose focus because other issues are more urgent right now.
Nobody likes to be in debt, yet it can happen quickly and easily. Unexpected medical costs, unplanned emergencies, and even regular purchases like groceries that mount up are some of the most frequent expenses that cause people to rack up credit card debt.
For many people, paying off credit card debt can feel like an impossible task. This concern may be observed in India’s rising household debt over the years.
You may not realize it, but managing debt and achieving debt freedom encourages people to develop positive relationships with money and self-worth. Therefore, this trip should be seen as a project, a challenge, and a teaching opportunity. By making a solid plan based on a strategy, you will repay the loan faster. You can also improve your credit score – and nothing in the world lowers your stress level faster than a healthy credit profile.
Firstly, we know about that how people get into credit card debt;
How we get into Credit Card Debt
Understanding how people acquire debt is a necessary component of learning how to prevent it. The good news is that there is a way to prevent you from falling into credit card debt; we’ll talk more about it later. We frequently assume that the main cause is financial, and this is undoubtedly possible. But there is another way of thinking about it that also leads to the same place. They occasionally make even more contributions to our credit card debt.
Let’s begin with the ones that don’t immediately spring to mind.
1.Not realising we’ve spent too much
Knowing where we stand each month is significantly more difficult when using credit cards.
Most of us feel good when we see money in the bank account.
The credit card bill then appears out of nowhere.
How did we spend so much money? There isn’t enough money to pay the entire bill.
This keeps happening over and over, and for many people, it turns into a never-ending cycle.
The truth is that figuring out our exact financial situation is made more difficult by credit cards.
Imagine how things would be different if each time you made a purchase, your credit card automatically withdrew funds from your bank account. Then you could observe the bank account decrease and would be aware.
2. Accepting it
The human brain is quite remarkable. Whenever we’ve been in any situation for a while, our bodies learn to adapt and become “comfortable” or “numb” with it.
As soon as we start carrying a credit card balance, we begin to think nothing of it.
This mentality is what causes and sustains credit card debt in people.
3.Your familiar bank account balance
This one is kind of intriguing. The first thing that comes to mind is that there isn’t enough to pay the bill in full, so you only make the minimal payment. Families may possess the cash, but there are occasions when they simply do not want it to leave their bank account.
In addition to cash in the bank, credit cards accumulate a balance. While not reflecting reality, it gives people a sense of security. The point here is that we all have a figure we’re “accustomed to” seeing in our checking account or savings account, regardless of whether the first or second situation applies to you.
4. Unexpected Costs
You recognise the emotion. The situation is developing. You’re moving towards financial stability.
Then something happens suddenly. A medical expense, home problems, and car problems. You end up charging it on your credit card, and the amount is in the thousands. unexpected costs. I won’t go into great detail about this because we have all heard of it.
5. A brief setback or income decrease
You’re used to living a certain way and subsisting on your money, but then it decreases.
Whether there has been a job loss, a pay cut, or you only get paid when you work and are unable to work for a while. In any case, a decrease in income swings the scales from saving to overspending, which increases your credit card load.
Why is debt from credit cards bad?
Although credit cards typically have the highest interest rates, there are other factors at work as well.
1.It is the starting point for all other debts
After one credit card debt incident, it becomes “normal” for a family. It turns out that carrying a balance is not a big deal. Everything eventually switches to monthly instalments.
The amount of money spent on payments increases as a result, making it difficult to catch up and go ahead. Having a small balance on your credit cards, however, is not recommended if you want to improve your credit score. This is untrue! Since you have less credit accessible, it really reduces your credit score.
2.The stress of catching up
Debt is money that has been spent but not yet repaid. You must therefore continue making payments on both past and present debts in addition to your continuing expenses.
It’s similar to staying up all night only to have to work a full day the following day, over and over again. Playing catch up with credit cards. Couples may experience significant stress as a result of this because they feel guilty about it and that they will never succeed.
Sitting in this world for a while is extremely common. When a couple shakes off their numbness and is ready to start acting, they typically contact me.
3. Recurring expenses drain your cash flow
When you’re playing catch up with payments, it’s challenging to save money. Due to needing to make minimum payment after minimum payment, the cycle continues until those obligations are paid off.
4. It drives up the cost of your purchases
We are constantly searching for discounts, offers, and deals. We’re searching for ways to “save” money. On the other hand, credit card balances are. Every year you hold the balance, everything you’ve purchased costs 20–25% extra.
Each additional purchase involves a hefty interest cost, even if you eventually manage to acquire reduced interest rates. For each additional purchase, your price increases.
5. It simply doesn’t seem right
Your energy is being sapped by credit card debt, even if you are not aware of it. Where did I learn this? Imagine that you are looking at a credit card statement that has a balance. What does that feel like? Now close your eyes and visualize yourself debt-free from credit card debt.
With these easy tips, you can avoid credit card debt.
We must minimize stress to operate at our best if we want to enjoy the finest possible life. One of the debts that we need to pay off is credit card debt.
How to avoid credit card debt The usual suggestions
It seems like everyone has strategies for avoiding credit card debt.
Is that my opinion too? Indeed, but that doesn’t mean it will be beneficial.
Here’s my opinion, and after that, I’ll list some potential solutions.
Maintain a budget “Yes, I’ve tried that. That failed to work.
Pay down the entire balance “If we could, we would.”
If you can’t afford it, don’t buy it. You’re welcome, Captain Obvious.
Stop the auto-filling of your credit card information. – We’re a busy family, I know. You want me to delay making the urgent purchases we require?
Cancel every credit card you have. “We’re not quite confident taking that action. Moreover, we must first put a cushion in place.
Apologies if this sounds a little cynical, but this is the way things is in this place. Without putting forth a lot of effort, we want things to work.
Simple Ways to clear off your Credit Card Debt
1. Put it in writing
When it comes to eliminating your credit card debt, knowledge is power. Making a list of crucial debt-related metrics is the first step.
Include all your credit cards, along with the balances due on each.
Note the interest rates that are applied to each card.
On each card, note the bare minimum payment owed each month.
Note the annual fees that the corporation levies on each card.
Note the due dates for each credit card separately.
To keep track of all your payments, create an excel sheet.
Understanding the aforementioned facts clearly is essential to paying off your debt as quickly as feasible.
2. Schedule your payments
Correctly determining the timeframe in which you will make your credit card payment is a crucial step towards debt independence.
This strategy not only aids in systematic debt repayment but also aids in preventing the amount owing from rising because of interest fees. The other advantage is that you maintain motivation while rebuilding your credit score by paying off debt on each card one at a time.
On the other hand, if you try to make equal monthly payments on each card, interest will continue to accrue. This influences both your credit rating and your capacity to obtain loans and other financial products.
What is the order in which credit card debt is paid off? It ultimately comes down to math, and there are some basic guidelines.
Typically, the credit card with the highest interest rate prevails. Commit to making the minimum payment on all other cards while paying off this card in full. This strategy, also known as the avalanche method, makes sure that most of the money you spend towards your credit card bill goes towards the main amount rather than interest.
3. Regular Pay Minimum Amount
Start paying off the card with the second-highest interest rate once the first one has been paid off, and only make the minimum payments on the other cards.
Start by making the minimum payment on the card with the highest balance outstanding if the interest rates on your other cards are the same.
4. Regularly make the minimum payment
Your monthly credit card bill makes this sum quite evident. You risk incurring extra late payment fines on top of your current obligations if you do not pay even the minimum amount due on each card.
Also, once you go over your credit limit, there is a chance that your credit card could be suspended.
5. Always pay on time
It’s imperative to pay your payments on time while you’re under pressure. Calendaring your payment plans a day or two before the actual payment date is a smart idea. This gives you some breathing room in case you are unable to pay off your debts in full each month as planned.
6. Negotiate with your bank
For instance, inquire with your bank about lowering the interest rate or waiving or reducing the annual fees.
If you have been a dependable customer for a long time and have always made your payments on time, you may have leverage, and banks are typically willing to talk to you. Yet, if credit card debt is a regular occurrence in your history, you must improve your creditworthiness.
Having stated that, you should really attempt conversing. Keep your composure for the greatest results.
7. Think about transferring your credit card balance
Customers with credit card debt can benefit greatly from a balance transfer. That enables individuals to move their obligations to a credit card with a significantly reduced interest rate.
There are many banks in India that provide this service, and some of them will also let you combine the balances of several credit cards into one single transfer balance card.
Together with cheaper interest rates, there are other advantages. You might be able to choose to pay the card off in three to twelve monthly instalments. You might not even be required to pay interest if you select a shorter duration.
8. consider a loan
Obviously, if you have solid relationships with your family and friends, this is a worthwhile alternative. You can avoid paying all that interest by paying off your entire credit card balance at once with a little assistance.
If you want to choose this path, be sure you have a good repayment strategy in place. You can also think about providing a reward. For instance, you could charge 2% interest on your loan if your credit card’s current monthly interest rate is 3.4%.
It’s important to have a detailed agreement and uphold the conditions.
Never take out a personal loan unless the interest rate is significantly lower than what your credit card company charges.
9. Reduce your spending
How frequently do you wonder where your money is going each month? You’re not alone, after all. This question also has a lot of people with disposable income scratching their heads.
Yet, it’s never too late to start over.
List your set monthly expenses first, such as rent, utilities, groceries, etc. Check to see if there is any room for cost-cutting here.
If not, continue to the next bucket, which contains impulsive purchases, products for personal care, and consumer goods that fall under the category of wants rather than needs.
It’s a good idea to put a temporary halt to leisure travel, pricey meals out, and other unnecessary expenditures. Spend all the money you would have spent on unnecessary items on.
10. Stop investing if you have debt
Maintaining an investment portfolio while in debt is another behaviour that does not go well with financial difficulty. Even if you do well on the stock market or with mutual funds, as your debt grows, any passive income is lost.
The best course of action is to temporarily halt investing until all of your credit card debt has been paid off. If doing so enables you to pay off your debt, you can think about liquidating some of your investments. Never touch your emergency fund, though; it will keep you safe in case of a financial disaster.
11. Increase your income
We are frequently conditioned to think that our job is the sole source of all of our income. But, by taking on side jobs and developing numerous revenue streams, more and more people are developing an entrepreneurial mindset.
Making a list of all your abilities and searching gig-work platforms for new possibilities are fantastic places to start. For gig workers with abilities like accounting, writing, editing, online education, and design, to mention a few, the internet has opened a whole new world.
You might also think about making a hobby into a company. For instance, if you are good at baking, crocheting, or building things, you may sell them and increase both your income and your sense of yourself.
12. Celebrate in your victories
Every time you reach a victory, taking a moment to celebrate can help you stay inspired and dedicated to your objectives.
For instance, treat your loved one to a wonderful home-cooked meal and a drink to celebrate paying off your first credit card. Every time you take care of yourself, it becomes special.
Conclusion
There are strategies to avoid getting into credit card debt, but it can rely on a number of things. You have full choice over what you charge on your card and how you intend to pay it back, even though your personal financial condition does have a significant impact. Be sure you are paying off your credit card balance on time, whether it is the full amount due or the minimum payment, as accruing credit card debt can seriously hinder your ability to build credit, be approved for the best rewards cards, and obtain loans.
