Of all the causes of indebtedness, spending and over spending on credit cards is probably the major cause of debt. The interest rate on credit cards is often very high and in fact designed that way that might possibly lead to unmanageable debt if card users are off guard.
Even if you can manage a credit card with rigorous discipline, it is advisable to compare the cards offered by different companies for their interest rates and subscribe the one that is a low interest credit card.
What type of credit card should be chosen?
As a matter of strategy to avoid debt, it is best to choose credit cards with longer interest-free period and lesser interest. The optimum combination of the two could be your best choice. Don’t go for gimmicks like free holidays, air travel, shopping etc.
Choose a credit card with zero percent interest offer of a limited number of days and be quick to switch over to a better option after the deadline.
Should the debts be converted into a single loan?
The debt-consolidation companies will lure you into subscribing to consolidation offers. Read their fine print. Your initial reaction may be one of relief for them taking care of your debts, but you are avoid caution before jumping at the offer. Ask what their rate of interest is and all the other hidden conditions that may not be immediately visible.
This loan often comes tagged with payment protection insurance terms. The terms as are well known are often unfair and would not cover you should fall ill or get out of job.
While the credit card loan is the unsecured loan, the single loan covering your debts are secured loans that can have severe consequences should you default on them. It is advised to choose unsecured personal loan to pay off all your debts together.
How should the debt be managed?
(i) Manage you debt before it gets unmanageable. Do not be overstressed. Share your worries with family members, friends and experts. Do meditation and positive affirmation. Don’t let the worries overwhelm you.
(ii) List your priorities and think over them coolly. Give the top priority to meeting obligations that require you to repay mortgage and utility bills.
(iii) In case of repaying credit card or store card bills, the top priority must be given to the cards that come with highest interest rate.
(iv) You can choose balance transfer deals if you have the option of transferring the balance to a card that has lesser interest rate.
(V) Bargain spiritedly with the company officials when they eventually come with the offer to settle the debt. You are likely to get upwards of 50 percent discount if you discuss your case intelligently. The debt recovery can be quite expensive to the company so they would be more than willing to settle your case.