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Credit Card Debt

How to Pay-off your High Cost Credit Card Debt?

by Holistic Leave a Comment | Filed Under: Credit Card

I remember of a recent incident, where a young man of about 30 years, who came to me for a consultation. He wanted to check with me different modes of borrowing money at a lower interest rate to pay off his high cost credit card debt.

I was curious. He was earning well. He did not have any other debt. He and his family were staying with their parents, hence he was not incurring any rent cost, no electricity cost, no food cost, no car instalments or insurance cost (he was driving his father’s car).

Why then the credit card bills have gone up so much? Well his credit card limit is Rs5,00,000/-.

I asked him why he wants the loan. He told that a loan at a lower interest rate will save him lots of money in repaying the credit card outstanding debt. The credit card company was charging him @ 36% p.a. I was happy to know that the young man had at least has taken two forward steps to pay off his high cost debt.

What about other Credit Card Debt Holders?:

We did a small study of 30 people in the age group of 27 to 35 (this young man was not part of this study) who are earning in the range of Rs10 lakhs to Rs15 lakhs p.a. about their credit card holding pattern and about their average outstanding credit card debt amounts.

We found that on an average these 30 people were holding 3.6 credit cards, i.e., between 3 to 4 credit cards and 26 out of 30 people did not know what were the total credit card debt they have at any point of time. They were bit lazy to find it out.

We became concerned at their attitude, and as a Financial Planner, the first thing we tell our clients, is that what cannot be measured cannot be controlled.

What these 26 out 30 credit card users should do? :

1: What is the total credit card debt?:

The first thing they should do is to find out what is the total outstanding debt against all the credit cards along with the annual interest rate of these cards. They can simple prepare the following table:

Name of Credit Card Total Outstanding Debt Interest Rate Monthly Minimum Payment
A Bank Credit Card X amount 30% L amount
B Bank Credit Card TY amount 36% M amount
C NBFC Credit Card Z amount 39% N amount
D NBFC Credit Card V amount 44% O amount

The above table would help these 26 persons to know their outstanding total credit card debts at a given point of time. This was the first easy way. Since they have measured their Debt, we will now discuss how to get rid of these costly debts.

2: Which credit card debt you want to close first? :

There are two approaches to pay off the debt. Look at them and decide about which one you feel comfortable to follow. The first one is to pay off the minimum amount required in all the debt but pay a little more with the highest interest rate.

The second method is to pay off the minimum balance in all the credit card but pay a little more where the debt is lowest (but not necessarily with the highest APR). The first method will help in reducing the cost of debt burden. The second method will give you the psychological satisfaction that one of debt is nearing to be paid off. Choose any one of these methods where you feel most comfortable.

3: Why don’t you negotiate the interest rate? :

As you are holding between 3 to 4 credit cards you can play one against the other and negotiate for a lower interest rate with credit card companies. If you are persistence, there are chances one or two credit card companies may agree to lower the interest rate, thereby reducing your cost of debt burden and helping you to reduce your debt.

4: What are all the repaying sources available to you? :

Now look in to the alternatives where from you will be able to raise money pay off the debts faster. Think. You may have a relative or a friend or a business associate who can finance you on easier times. There are banks who are giving personal loans at interest rates between 13 to 14 percent.

You may be having some investments/ assets like PPF or insurance policies or jewels which can be pledged and taken loan at a rate lower than the interest rate charged by the credit card.

5: Can you save more? :

Now you look at your cash inflows and outflows and try to see that whether, you will be able to increase the cash surplus (difference between cash inflows and outflows by reducing the cash outflow. You need some financial discipline to able to do it.

Now tell me all the above ways are easy or not for you to follow and get rid of the costly debt which you have acquired and feel more relaxed and happy.

A debt pay-off plan help a person become debt free. Similarly a complete and comprehensive financial plan will help you achieve financial freedom. If you want to understand our 360 degree financial planning process, we offer 30 minutes free consultation
 
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Jey S
24. September, 2021.
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aksaswadkar
24. September, 2021.
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Nitesh Agrawal
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6. September, 2021.
I have been using Holistic Investment Planners from last one year. The journey has been fantastic. Being a finance person myself I always thought we can look after and plan own finances also. However, due to lack of time and deciplain the things are not always as desired. After joining with Holistic Investment for the first time Icame to know the Financial goals and quantified them. Some dreams were unrealistic based on the earnings and savings so had a reality check. Also got the information and deciplain of investing on regular and more rewarding securities. I definetly suggest to use Holistic Investment Planners. They are professionals, available and hear youor full story before presenting plans. They are flexile in the sense if there are some urgent deviations required, they help to plan the same. For all professionals/individuals I would suggest using professional help of Holistic Investment Planners for best results in long term investment and financial goals achivements. Last advise will be to start early in your life. It really pays well to start in the beginning itself else the dreams needs to adjust :)
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6. September, 2021.
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Joseph Mathias
Joseph Mathias
6. September, 2021.
I came to know about Holistic Investment Planners online while searching for different investment ideas. Once I contacted them the journey was very smooth. Mr. Ramalingam explained all the aspects of Financial planning in detail and it opened my mind. I realized how important it is to have a Financial planning. Mr. Rajan suggested all the requirements as per my goals and made a Investment plan keeping in mind of my goals. I started my Investment journey with them. I wish I had done it some years back then it would have been in a different level. Review meetings were held every six month to check the implementation of the plan and check the results as per the requirements and to check if any changes required. Overall it was a good experience with Holistic Investment team and would like to continue in the years to come.
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30. July, 2021.
I came across Holistic investment planners almost 5-6 years back, but I did not have the trust since I had met a few of them who did not sound promising. Then I started investing through a financial advisor of my friend. After 4 years of investing the returns were very low. I was disappointed and started looking for financial advisors when I came across Holistic investment. I had a detailed discussion about my goals and the way they would approach achieving my goal before deciding to switch my investments to them. After a thorough analysis of my then existing portfolios, they suggested new ones and we zeroed-in on 6 schemes/funds where our investment would be split. I am glad I made the decision of switching over and taking Holistic planner's advise, my returns are handsome and I only wish I could have taken their help/advise 5 years back itself. Neverthless, I would like to recommend their services for investment and financial advise if someone is serious about their investments.
Shivaram Andiappan Selvaraj
Shivaram Andiappan Selvaraj
3. July, 2021.
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Nellai B
Nellai B
26. June, 2021.
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