How not to pay your credit card debts
If you use your credit card sensibly, then you will have a minimal debt that can be managed easily. On the other hand, if you go crazy with your card and start spending recklessly, then you are quite likely to land yourself in massive debt. All of us are familiar with stories wherein people’s lives have been changed for the worst, all because of a dreadful spending habit.
Even if push comes to shove, there are many ways to deal with your credit card debt. The internet is full of useful tips and suggestions on how to manage your debts smartly. You can consider credit card balance transfer or look into debt consolidation loans. However, you must realise that when it comes to credit cards, you’re borrowing money in the present so that you can pay it back in the future.
Depending on you how you use it, you may or may not have to pay an additional interest on it. But as a rule of thumb, remember this – never take a loan to pay another loan. It will create a vicious cycle which will become harder and harder to break with cent you borrow. Based on this and a bit of wisdom, we have compiled here a list of how not to pay your credit card dues.
Paying your minimum balance
Credit card companies let the borrowers pay a minimum amount every month, instead of the entire outstanding sum. This may sound like a good deal, considering that you get to pay your dues in small installments, but nothing can be farther from the truth. This is because of the interest that keeps piling up on the outstanding amount in every cycle.
Given that credit card companies levy a high rate of interest, paying just the minimum balance every month will lead you down a road which ends with you paying exorbitantly high amounts. You may have started out with a debt of Rs.50,000, but after paying only the minimum balance for a few months, you may end up owing a lot more than that.
In addition to this, it is the slowest way to clear your credit card debt. And if you are still not convinced, you should think about how adversely it will affect your credit score and your ability to avail home loans and personal loans in the future.
Digging into your emergency funds
Emergency funds are meant to protect you in time of financial emergencies. These may be anything ranging from natural disasters and calamities to unexpected medical needs, loss of job, etc.
You need to understand that credit card debt is not a financial emergency. It is a burden and only you are responsible for it. If you utilise your contingency funds to pay your massive credit card dues, then you leave yourself vulnerable to unforeseeable financial crisis. This, in fact may land you in a bigger problem than having a huge card debt.
Not paying your home loan EMI
If you are far too dependent on your credit card, then you may start coming up with creative solutions to pay your monthly dues. And before you consider the idea of skipping your home loan EMI payment,
we are here to tell you – don’t!
You may be desperate enough to not lose your credit and as a result, are willing to miss your EMI payments. However, by doing so, you’re risking foreclosure and in turn, putting your house in danger.
Selling your house/property
Yes, even though this option sounds a bit ridiculous, you will be surprised to know that over the years, thousands of people from all over the world have had to sell their homes in order to clear their massive credit card debts.
If you are thinking of selling your property to clear your dues, then know that even though you will no longer be in debt, there is a very good chance that you may have to sell your property at a lower rate. This means incurring a heavy loss and getting the chance to gain the true value of your property.
Taking loans against assets
Loans against assets like cars and jewellery are easy to get as banks readily sanction them. However, if you intend on using this loan to pay your credit card bill, then think again.
You are not clearing any debt, but are simply shifting it from the credit card company to your bank. And if you fail to pay back the bank, then it has every right to take the items you used as collateral to avail the loan.
Remember, credit cards are not bad if used wisely. They can help you in a lot of situations, provided you use your card responsibly. However, if you ever find yourself in a colossal debt, seek help instead of opting for these methods of credit card debt repayment.
All the best!
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