How to Reduce Credit Card Debt?
Recently I got an email from one unknown person to me asking me to advise on How to reduce credit card debt? This, I received on my company email and responded him saying that I am no financial expert and he must contact a competent person, able enough to answer his query.
That evening I sat down at my desk, and I thought for a while on the question that person asked me: “how to reduce credit card debt?”
And upon thinking for some time, I said to myself, ‘well, reducing credit card debt is not that tough especially if you are willing to do so. Most of us have done it, including me. I was a victim of my own lifestyle. I had raked up huge credit card debt which I one thought were humongous considering my capability to repay. But I overcame the credit card debt that I had.
And here is how I did it. I believe if we follow these steps most of us will be credit card debt free.
1. Reduce Credit Card Debt: Start with hiding your credit card.
This sounds stupid but makes a huge difference. If you cannot hide them ask your wife or your parents to do so. Banks have been reckless in doling out credit cards as if they fell from the sky. Remember, if you have used a credit card, you are in debt to the bank that issued the card. Banks will go to any extent to get the debt back. If you have ever used a credit card online and if these details are saved somewhere online make sure to delete them immediately so you don’t have an urge to use them.
2. Reduce Credit card Debt: Look out for that 0% balance transfer offer from the banks.
Few banks if not all, provide 0% balance transfer for specific period on their credit cards. If you have the card from these banks you are in luck. Make sure that there are no any processing charges or hidden charges. Transfer the balance from a high interest credit card to a lower interest card. Make sure the period is considerable at least 3 months. Transfer from the higher outstanding card to the lower outstanding card. This way you wont end up accumulating debt in one card.
3. Reduce Credit card debt: Take a personal loan and close the credit cards.
Taking personal loan is a better option as the interest rate in personal loan is not as high as in the credit cards. This is not the case in all the banks though. I have come across banks in UAE charging interest rates as high as 39% on personal loans which is exorbitant. Make sure you read the fine print in the loan agreements. Once you take a personal loan make sure that you close the credit card debt as soon as possible. Closing your credit card debt should be your priority.
4. Sell your unwanted assets and pay for the credit card. First thing I did when I wanted to close my credit card was to assess which unnecessary assets that I owned. I made a whopping list of around 8 items, such as an old mobile phone, a tennis bat, few DVDs and so on. The next thing I did was to list them on Dubizzle.com and souq.com. well, I could almost get AED 1500 out of these unwanted assets that I owned. That is a good amount you see. This helped me in two ways. One, I could dispose off my things which I hardly or never used. Second, I got cash which I used to pay-off my credit card debt. Selling these unwanted things contributed towards closing my credit card debt.
5. Make a plan: For whatever that needs to succeed, there must be a plan. What I did was to make minimum payments on the largest outstanding credit card while I closed the lower balance credit cards. This helped me at least close one of my cards. Otherwise I would be paying for both the cards. Once I closed the credit card debt with the lower outstanding card, I could concentrate on the higher outstanding card, which I close in the next three months. I had a plan and this will differ from person to person and on the number of cards you have.
6. Stick to the plan, come whatever be: Many of us are good at making the plan. But only few follow the plan that is made. They either get carried away by the things happening or they just are not built for this. So, a determined person can only make things happen his way.
7. Talk to the banks and negotiate a lower interest: It makes perfect sense to talk to the bank if you feel that the interest rates on your card is high. Banks might, on a case to case basis consider your request. Make them aware about your financial situation. And make sure that they do not charge any fee for this service. Otherwise, there is no point to this.
8. Know what the outstanding are: Before you start, know the current scenario of your cards. How much do you owe to the banks? And accordingly make a plan to repay them.
9. Be Frugal: If you feel that things are not going your way, and you are desperate to save money which you can not, be frugal in whatever you do. Evaluate your daily routine. Where do you think you can cut corners when it came to money? I evaluated my energy or electricity usage and found that I could shave off at least AED 100 per month on electricity bill, which I eventually did. You can read it here. In your daily life check to see where is it that you spend on a daily basis? Is it in that cup of Costa coffee? Think. Now make an effort not to stop one day. How much did you save? At least AED 15. Multiply this figure into 20 days. And it’s a whopping AED 300. Use this money to pay off your credit card debt and if you do not have credit card debt, save it.
10. Do not ever stop: If after you have paid the credit card debt, you are tempted to swipe it again on an unnecessary item, think twice and ask yourselves: ‘do I need this item, or do I want this item?’ This question will answer your doubts. Once your credit card debts are finished start saving that money for the rainy day in a savings account or in National Bonds.
11. Share your plan with your wife or Family: I do not need to explain this. What I mean to say is that your family should be aware of your plans and you must seek their help and advise too. My wife has been a great help throughout my struggles.
Be out of credit card debt. This is what I have to say!