Santa Claus comes around just once a year. In the meantime, there are Credit Cards.
  • How to Come Out of a Credit Card Debt Trap

    Credit cards are one of the most used financial products today. The popularity of this is such that credit cards can be attributed to creating a new revolution in the way finances work. This plastic card allows holders to borrow money on a credit to purchase goods and services and pay back the same every month. Credit cards also come with a number of offers and features such as dining discounts, fuel surcharge waiver and so on. However, for all the benefits offered by credit cards, if individuals do not pay their bills on time or do not use their card judiciously, it can result in their falling into a credit card debt, which is difficult to come out of. Falling into a credit card debt trap will also result in their credit score falling, making it difficult for them to procure loans or other credit cards in the future. However, it is not impossible.

    Steps to Follow to Come Out of a Credit Card Debt

    By following the steps given below, customers can come out of this debt.

    Credit Card Balance Transfer

    One of the options that customers can avail is to transfer their outstanding debts to another credit card. This is also a feasible option. They can either procure a new card for this purpose or they can use on of their other existing cards. When a new card is procured, a limited promotional period will be available during which the interest rate will either lower or will not be applicable on the balance that is transferred. The objective of this option is for customers to avail a certain limited period that usually ranges from 3 months to 6 months, in which finances can be worked out and the entire debt can be paid off.

    For example, certain credit cards from SBI will allow cardholders to procure a 60 day tenure at 0% rate of interest or a 6 months tenure at 1.7% rate of interest per month. However, it must be noted that the transferred balance will have the usual rate of interest applied after the promotional period ends. A number of credit card providers allow individuals to convert their transferred balance into Equated Monthly Installments or EMIs. Prior to opting for this choice, customers must first compare the benefits and offers, processing charges, rates of interest, duration of promotional period and other features prior to settling on one card for the purpose of balance transfer. It is always better to look around, research and compare prior to settling on one card.

    Fresh Loans at Lower Rates of Interest

    Another option that can be procured by customers is to raise a loan to pay off the credit card debt. Rate of interest on gold loans, personal loans or loans against bank fixed deposits and securities are relatively lower than the interest rates that are charged by credit cards. For example, interest rates on credit cards generally range from 25% to 30% whereas personal loans come at rate that is much lower, such as 12% to 25%. In case individuals are unable to procure personal loans due to low credit scores or income, they opt for gold loan or loan against securities.

    Conversion of Outstanding dues into EMIs

    This is another option that individuals can choose to come out of their credit card debt trap is to convert their outstanding balance into EMIs instead of transferring to another credit card or procuring another loan. Customers can convert their balance into EMIs of 3 to 12 months period, and usually at a rate of interest of about 18% per annum. However, it must be noted that a processing fee of 1.5% to 3% is charged for converting their outstanding balance into EMIs. If EMIs are not paid back by due dates, a standard credit card interest rate will be applicable on the balance amount.

    Redemption of Investments

    This option should be chosen only if liquidation of existing investments does not carry a high opportunity cost. For example, closing fixed deposit accounts for repaying a credit card debt is feasible only if interest rate applicable is not over 9%. This is lower than the rate of interest that will have to be paid even on alternative loan options such as gold loan, personal loan or an EMI conversion. On the other hand, redeeming equity mutual funds may result in a high opportunity cost especially during a bullish market trend. During such times, returns on equity investments can be as high as 20% or even higher making personal loans a much cheaper option.

    One of the fastest growing debts today is due to credit cards. Customers should always be careful when it comes to using their credit card and must always be aware of the bill that is being accumulated. Credit cards must only be used if it can be repaid comfortable at the end of the billing cycle. That being said however, there are instances when individuals fall into a credit card debt despite their best efforts. In such cases, any of the above options can be chosen and as much as possible, settlement should be avoided. Also, until the debt has been paid off, customers should not opt for fresh transactions on their card. Finally, customers must always study their credit report and work on enhancing their score. By following the above steps, customers can come out of their credit card debt soon.

    Why You Should Choose Credit Cards Over Debit Cards

    These days, people at least have one credit card and one debit card in their wallet. When you look at these cards, they are almost similar. However, the benefits each type of card offers is different. Although both are plastic money, have a 16-digit unique number, and works only when you enter the PIN, the way they function is different.

    While debit cards allow you to use your funds that you have in your bank account, credit cards allow you to borrow money from the bank/credit card company and allows you to repay it later. While using your debit card might ensure you do not fall into the debt trap, credit cards offers a lot of benefits.

    Most of the credit cards that are being issued in India are exclusively designed to offer discounts, cashback, coupons, and reward points that will benefit the cardholder, motivating them to use their credit card frequently. Yes. Credit cards have the potential to push you into the debt trap. However, if used wisely, it can be beneficial.

    Some Of The Reason Why You Should Choose Credit Cards Over Debit Cards

    • Credit cards help you buy expensive products on EMI without burning your savings account. You can use the funds you have in your bank account for other purposes and still buy things you love to own. Most credit card providers also offer No-Cost EMI these days, which means you do not have to pay any interest or additional charges when you convert a transaction to EMI.
    • Most of the credit cards come with a great loyalty program where cardholders can earn reward points on certain spends made on their card. Cardholders can use these reward points to claim free gifts, book flight tickets, buy selected merchandise, or even pay there credit card bill (depending on the type of card they own).
    • Credit cards also give reward points if you use your card to pay your utility bills. This way, you will land up saving while you spend!
    • If used wisely, credit cards help you build your credit score. Debit cards do not have the potential to help you build your credit score.
    • Some credit cards even provide additional benefits like extended warranty on some products purchased using your credit card. However, most cardholders are not aware of this feature and fail to use this benefit.
    • From time to time, credit card providers tie-up with retailers and offer exclusive discounts for their cardholders. Debit cards do not have these promotional offers.

    In conclusion, having both debit and credit cards are beneficial, if you use them wisely.

      

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    Credit Cards Reviews

    • Bank Bazaar Credit Card
      "USERFRIENDLY PORTAL TO USE"
      0.5 4.0/5 "Great!"
      It is the second time experience with the Bankbazaar.com as i am using it through the website as the portal is convenient and user friendly portal to access. The customer support and responsiveness is good by explaining the details of the card.
      Was this review helpful? 0
      , mumbai
      Reviewed on Apr 23, 2019
    • YES Bank Credit Card
      "Highly disappointed with the credit limit"
      0.5 1.0/5 "Really Bad"
      Yes bank has given the very lesser credit limit of only 33 thousand. But while purchasing the card they said they will provide up to one lakh as a credit limit to me . This is completely miscommunication has happened to me . I am going to cancel this card very sooner .
      Was this review helpful? 0
      , bangalore
      Reviewed on Apr 23, 2019
    • Bank Bazaar Credit Card
      "Good reputations in Digital market"
      0.5 5.0/5 "Blown Away!"
      Bank bazaar has good reputation in the online market . Customer can have the trust and login in with their personal information in the portal . I got a earlier call from them for the Credit card proceedings . They have chosen the correct card and dispatched on time to me .
      Was this review helpful? 0
      , indore
      Reviewed on Apr 23, 2019
    • ICICI Bank Credit Card
      "Very good"
      0.5 4.0/5 "Great!"
      This is life time free card no need any annual charges and in this card cash back offer but not much sometime got cash back last five month above I have ICICI bank credit card and I am satisfied with credit limit 45K and their customer service is good and response is also good , I am happy with this credit card,
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • American Express Credit Card
      "Good"
      0.5 4.0/5 "Great!"
      I got credit card within 7 days after approval , this is chargeble 500 rupess and here rewards point offer , reacently I got american express credit card , I am satisfied with credit limit 50K , and their allover service is good , I am satisfied with this card,
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • Bank Bazaar Credit Card
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      It is the first time experience with the Bankbazaar.com as i am using it through the mobile application as the application is convenient and user friendly to access. The customer service is good and they are responsive as they explain the details of the card.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 23, 2019
    • SBI Cards Credit Card
      "Average card"
      0.5 3.0/5 "Satisfactory"
      I have STATE BANK OF INDIA credit card . They offered 10000 of limit but i need 30000 so i am not happy with that . Offers is nothing very limited only i ma getting reward points .There is joining fee but once i do the transaction of 30000 the fees will be waive off .
      Was this review helpful? 0
      , kolkata
      Reviewed on Apr 23, 2019
    • Bank Bazaar Credit Card
      "Good service"
      0.5 5.0/5 "Blown Away!"
      For couple of months i am using bank bazaar website . The whole application process was smooth and hassle free. I never had any issues with the services. The customer support follow up was also effective during the application. Only when i call them they are not responding .
      Was this review helpful? 0
      , kolkata
      Reviewed on Apr 23, 2019
    • American Express Credit Card
      "Very Good Service"
      0.5 4.0/5 "Great!"
      I am using the AMEX CREDIT CARD for a very long time where the services had been quite good. The credit limit with this card is sufficient and there is some added benefits in using this card as well. The card is a life time free card and i am using the card for all sort of purposes. There has been some good reward point system with this card and the cash back offers are also good with the card.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • IndusInd Bank Credit Card
      "Good card"
      0.5 5.0/5 "Blown Away!"
      I hold INDUISND BANK credit card , i was using this past 1month . They charge very reasonable interest rate and they have not charge me any annual fee which is good . Offers are good here in restaurants , traveling , reward points . This is good card and useful too .
      Was this review helpful? 0
      , kolkata
      Reviewed on Apr 23, 2019
    • SBI Cards Credit Card
      "Very Good Service"
      0.5 4.0/5 "Great!"
      It has been more than five years since i am using the SBI CREDIT CARD, the best thing with the card is the reward point system which it has. There is a good credit limit with this card and there has been some annual charges as well. I am using the card for all sort of purposes where i am getting some very good benefits by using it.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • ICICI Bank Credit Card
      "Very Good Service"
      0.5 4.0/5 "Great!"
      It has been six years since i am using the ICICI BANK CREIDT CARD, the services of them has been good where there has been some very good offers they are providing as well. I am happy with the credit limit with this card and i am using the card for all sort of purposes like shopping. There is a good cash back offer which i am getting through this card.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • American Express Credit Card
      "EXCELLENT"
      0.5 5.0/5 "Blown Away!"
      The documentation process was smooth and simple with the applying credit card from AMERICAN EXPRESS BANKING CORPORATION, it is a payable for the first year of 500 rupees. The credit limit is good. I got the card within week. I am not using the offers from this card.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 23, 2019
    • Bank Bazaar Credit Card
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I am using the services of BANK BAZAAR for the last two to three years where the services of them has been quite good. I had been using their mobile application which is having a good user interface, their customer support team has also been responsive where they had been helpful while getting my credit card through them.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • HDFC Bank Credit Card
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I had taken the HDFC BANK MONEYBACK CARD since there is offers with this card on some online shopping portals. The process in getting this card was simple and easy, the card also was delivered on time. There is some annual charges of 500 with this card with a waver off option. I am satisfied with the credit limit with this card.
      Was this review helpful? 0
      , hyderabad
      Reviewed on Apr 23, 2019
    • SBI Cards Credit Card
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I am using the SBI CREDIT CARD for a long time and the services with them has been quite good, i am satisfied with the credit limit with this card and it has some good reward point system, based on that i am using it for multiple purposes. There is also some annual charges with the card.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 23, 2019
    • Standard Chartered Bank Credit Card
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been a long time since i am using the STANDARD CHARTED BANK CREDIT CARD, where i am quite satisfied with the services provided by them. It has a good credit limit and there are added benefits with this card where i am utilizing it accordingly. The has not been any issues faced with the banking services of them so far and i am using the card for many purposes according to the benefits provided by them.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 23, 2019
    • Citibank Credit Card
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been over five years since i am using the CITI BANK CREDIT CARD, i am happy with the services provided by them. There has been some good benefits in using the card which mostly comes like reward points while purchasing fuel. There is some annual charges but if i am using a certain limit it will get waved off.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 23, 2019
    • HDFC Bank Credit Card
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I am using the HDFC BANK CREDIT CARD for more than six years where the services had been really good. The credit limit with the card is good and there is some benefits with this card which comes like reward points and cash back offers. The annual charges with the card will get waved off as per the usage.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 23, 2019
    • Bank Bazaar Credit Card
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      I was just looking in the INTERNET and came to know about the services of BANK BAZAAR, where initially i checked my credit score through them. The web portal with them is quite convenient in using and their customer support team is also really responsive. I had also applied for my credit card through them where the experience in getting my card has been easy.
      Was this review helpful? 0
      , coimbatore
      Reviewed on Apr 23, 2019
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