How To Reduce Credit Card Debt: The Top 9 Tips

Credit card debt is a very common and expensive problem in India. The RBI (Reserve Bank of India) is urging people to start paying off their credit card debt, but they offer no advice on how to go about this. A good step would be an action plan to reduce and eliminate your debts in India like getting a credit card with a 0% APR (interest rate).

The good news is that there are many ways to get out of credit card debt and it is possible to pay off your debt without too much effort.

To reduce credit card debt, you should first figure out how much you need to pay each month to eliminate the balance before interest charges accrue. Make sure that this amount is at least as high as the monthly minimum payment and then include it in your budget.

How To Reduce Credit Card Debt

1) Know the debt-to-income ratio

The basic debt to income ratio, or DTI for short, is a great way to assess your credit card debt.

Simply, this is the total amount of credit card debt you owe, and the income you earn in a year. For example, let’s say your debt-to-income ratio is 40%.

This means you owe an amount of Rs 2.4 lakh on your credit card, which you have not paid off for the whole year.

This is far too much debt for you to pay off. Now the simple way to reduce your debt is to reduce your income.

Withdraw your credit card for a month Most people have easy access to credit cards.

Instead of paying the minimum due, why not get a full month’s pay by repaying the debt in full before you have to go for another pay cheque?

Your monthly expenses should not change, but withdrawing your card would be a good idea.

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2) Get a credit card with 0% APR

You need to stop making payments on your credit card. Look at ways to get a credit card without any APR.

Many people have used this. They call up their credit card company and get a credit card with 0% APR, without being asked to pay anything. You can do this too.

You can use that 0% credit card balance to invest in mutual funds, get a good credit card with 0% APR, put the balance in a PMJDY account and earn up to 6% interest. You can easily do this.

Cut down on the rent Take away some of your rental income from your rent. In case you own a flat or a home, you can do this by getting a vacant possession order.

Buy some properties at throwaway prices, sell them and spend the money on the credit card. Have a look at what banks offer in their annual offers.

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3) Reduce your monthly spending by 20%

That’s not to say you should stop enjoying your favorite meal, or going on vacation.

Reduce your monthly spending by 20% – and put the difference into a high interest savings account Cutting your spending down by 20% is an impressive feat.

The reality, however, is that with a bit of effort and planning, you can shave off even more. For example, this graph below shows how much you can save by trimming your non-essential spending.

Give your credit card to your bank or institution for the 0% period, and use the opportunity to also get a loan for some extra funds you’d like to use over the next 1, 3, 6 or 12 months.

It’s a great move because you’re not reducing your savings, which means you’ll be in a worse position when you run out of money at the end of the 0% period.

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4) Pay off your debt faster

When you pay off your debt faster, you’re helping your finances to grow faster. It’s an important step that will help you reduce your credit card debt and thus, your credit score.

Avoid keeping too many credit cards open Unless you really have to have a few credit cards open, then you should get rid of them all and close them before the end of the month.

Your credit card debt will never decrease if you keep the account open for the entire month. Budget and spend only what you have If you have enough money to spend, then there’s no need to worry about credit card debt.

You should spend your money on what you want, not what you don’t. Remember, you’re not going to be punished for not paying off your credit card debt when you are already earning and can pay your bills on time.

5) Check your credit history

The main reason why people don’t pay their credit card bills on time is because they don’t check their credit history.

Every month, banks upload information about your credit history in the ‘bill payment section’ of your credit card statement. Read the statements carefully, especially the number of days you have paid your credit cards.

If your credit cards were used less than 15 days in the previous 30-day period, start paying the outstanding amount in full immediately and start using your card again.

If your credit cards have been used more than 15 days in the previous 30-day period, use your card but not make any more payments.

You can’t avoid debt by avoiding the repercussions of having a credit card. You have to pay your bills on time.

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6) Check for fraud

Do not give out personal information such as bank account number, telephone number, email address, mobile number, date of birth etc. to unknown persons, but if you think someone is not who they are saying they are, you should call them immediately and report it to your bank.

So far, no serious fraud has been reported in India, but the fraudsters are everywhere and they are always watching you.

Make a budget If you find yourself in a situation where you cannot pay your credit card, you should probably look into reducing your spending in your monthly budget.

However, before you start, you need to determine how much credit you are able to take and what you are able to afford and pay.

7) Know when is the right time to get a loan

It is important that you have some money saved and saved well so that you can save for the wedding in the family or some other important expenses.

Getting credit on a credit card can help you to get loans from the lender and have enough funds to pay it back. In short, a credit card can help you to earn interest on your current loan.

Never use credit cards for small bills It is best to avoid credit cards for spending money on small bills like grocery or eating out, because those purchases add up quickly and it will be very difficult to repay your credit card debt in one shot.

Keep a clear credit card bill You may have your credit card bill but it may be not so clear where your money is going to. This is when it is very important to keep a clear credit card bill, not a confusing one.

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8) Consider getting a personal loan

This step is much easier for many people as it is very affordable and does not have to be paid back for the life.

The loan comes with an interest rate, but will also keep the credit card out of your life. If you have been a victim of the vicious cycle of getting yourself in debt and paying a large sum of money back on the credit card every month, you may want to get a personal loan instead of a credit card.

These loans do not have interest rate and do not carry any guarantee. You will get a personal loan with 0% interest, or a loan for a fixed duration or term.

These loans do not have any risk involved so you are free to spend as much as you want. However, keep in mind that some lenders put a cap on the overall amount you can spend on this loan.

9) Create an action plan

Practical action is very important for realizing one’s financial goals and for getting them accomplished.

What do you want to achieve? What you actually need to do to reach your goal? What’s your first step? This is the first question one should ask before taking any action.

Avoid the temptation to spend This is a very important step to follow in life.

Avoid spending on unnecessary things.

Get yourself a cheque book and make sure that you never write a cheque. Instead, pay your bill in advance in cash.

Do not get tempted to buy a lot of things you don’t need. Use your cheque book only when you need to pay a particular bill.

Loan or borrow less Credit cards are one of the easiest ways to borrow money.

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Credit card companies won’t be glad to see you reducing your debt. In fact, it might be the last thing they want to hear about. They are not that kind of organizations.

They care only for the number of people they can charge more fees to and increasing their profits.

Therefore, if you start getting those calls from credit card companies, you are doing the right thing.

Naveen Rawat
Naveen Rawat

Naveen is a digital marketing expert. With his research on, he helps people get up to date with the latest business, finance, and government schemes.

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