You are busy updating Facebook statuses and watching the ‘likes’ pile up by the second, when you get a reminder on your phone – credit card dues are pending. The rainbows of the holiday disappear in one bright flash and the humdrum of reality hits you hard. How will you manage to pay off the excesses of your holiday spirit? You need a plan and you need it fast. Here are some smart tips to help you through the fog of holiday debt.
- Prioritize what you want to pay first: The easiest way to take stock of all your items of payment is to create a consolidated track record of all payments made through all your credit cards or private personal loans, if any. This will give you a holistic view of all that you owe and help you plan your repayment. Attack the payments that have a heavier interest rate to ensure you can tackle the low-weight debts in due time.
- Hands off the credit cards: The best way to ensure you don’t default is to prevent the bills from snowballing further. In the interest of maintaining a record that leaves your name out of any loan defaulter list, curb the urge to accumulate reward points on your credit card. Keep your focus on clearing the dues on your current credit cards. Remember, that your CIBIL score takes into account the ratio between your credit limit and the amount you use up. Your holiday may have messed up that perfect credit utilization. To bring it back on track, avoid using your credit cards further.
- Pay up sooner and in larger chunks: Don’t just try to stay afloat by paying just the minimum amount on the card. This gets you caught in a downward debt spiral from which it takes hefty payments to recover. It is important to maintain a healthy credit score at all times, and this can only be obtained by proving that you are a financially disciplined person. Don’t wait for the monthly bill to come along before you make the payment. Bring down your debts by making as frequent payments as possible.
- Transfer your balance to a new card: If you are struggling to make ends meet on your repayment plans, you might want to transfer your current balance from either a single card or multiple credit cards into one card. All credit card companies allow such a transfer. With this move, you gain yourself a credit-free breathing period of 90 days, during which you won’t have to pay any interest. You could use this period to streamline your incoming cash flows, so you are ready to pay the interest once the credit-free period is over.
- Automate your payments: It’s true that if you are worried about repaying your debts, you will be all the more alert about not missing your repayment dates. Often, however, our best intentions are marred by simple acts of forgetfulness or emergencies such as weekends interfering with payment dates, or sudden travelling or busy schedules or technical glitches that prevent you from accessing the bank. Such events can be avoided by choosing to have money automatically deducted towards payments.
- Have an honest conversation with your credit card company: We don’t like to think of the worst situations, but in this grown-up world we cannot avoid facing the facts either. You may return from your holiday or vacation to a sudden emergency that locks down your finances, and you may have no way to attend to the credit cards bills that have mounted up. What do you do in such genuine cases of helplessness? Well, the best way forward is to talk to your credit card company and come to some such agreement that will prevent your bills from becoming a monster that you cannot control. They might be able to work out a solution that may give you temporary relief or even loan out money to prevent any further damage, till you are in a position to fuel your repayments from a steady source of income.
If you are not too way off target with your repayment plans, tips 1, 2 and 3 should be enough to see you through the debt load. It is important to party, to have fun, and enjoy time away from the rush of everyday life. When we do it within our means and have a hold on our budget, the fun stays for a longer time – and you can continue raking up the likes and basking in the flattering comments on Facebook!