Credit card debt is on the rise in India, leading to significant concerns. As of March 2023, credit card defaults in India rose to Rs 4,072 crore and credit card debt reached Rs 2.10 lakh crore, showing an increase over the previous year. The surge in credit card debt has been accompanied by a lack of growth in industrial credit, indicating a growing debt burden on Indian consumers and borrowers. There has been a significant increase in credit card issuance and usage, with the number of credit card holders increasing from 29 million in March 2017 to 62 million in March 2021, showing a compound annual growth rate (CAGR) of 20% over the last four years. These figures highlight the growth of the credit industry in India. With more access to formal credit through credit cards, Buy Now Pay Later (BNPL) options are especially targeted at the unbanked and underserved segments.

Credit card debt can quickly spiral out of control, leaving you in a state of helplessness. However, with the right strategies and mindset, it is possible to get rid of the debt trap. Learn more about the practical steps you can take to pay off your credit card debt and regain financial control.

Consider your credit card debt.

The first step in dealing with credit card debt is to understand a clear picture of your outstanding balances. Make a list of all your credit cards, including the issuer, total balance, interest rate, and minimum payment for each card. Organizing this information will help you create a targeted repayment plan.

Separate your credit card debt

Once you've made a comprehensive list of your credit card debts, separate them based on interest rates. The debt avalanche method is to pay first for the card with the highest interest rate and make minimum payments on the others. By targeting high-interest debt, you can reduce overall interest and speed up your debt repayment.

Creating a budget

In order to pay off credit card debt effectively, it is crucial to create a budget that allocates funds for debt repayment. Review your monthly income and expenses, and identify areas where you can cut down on unnecessary expenses. Redirect these savings to pay off your credit card balances. Use budgeting apps or tools that are specifically designed to track your spending, and stay on track.

Consider the balance transfer options.

If you have a good credit score, you may be eligible for balance transfer offers from other credit card issuers. These offers usually provide a lower interest rate for a certain period of time, allowing you to save on interest rates and pay off your debt faster. However, one must be careful about the balance transfer fees and read the terms and conditions carefully, as they may vary between Indian banks and credit card providers.

Talk to your card issuer.

Contact your credit card issuer and discuss your financial situation. Some issuers may be willing to lower your interest rate, waive some fees, or offer a repayment plan that fits your budget. Be proactive in communicating with your card issuer and demonstrate a commitment to repaying your debt.

Consider debt consolidation

Debt consolidation loans, available from various banks and online lenders in India, allow you to combine multiple credit card debts into a single loan at a lower interest rate. This will simplify your repayment process and save you money on interest rates. Compare offers from different lenders and carefully evaluate the terms and conditions before proceeding with debt consolidation.

Avoid using a new credit card.

When paying off your existing credit card debt, it's important to avoid accumulating new debt. Avoid unnecessary purchases and limit the use of your credit card to only essential expenses. Focus on living within your means and prioritizing debt repayment.

Check your credit score

Check your credit score and credit report regularly from authorized credit bureaus in India, such as CIBIL, Equifax, and Experian.Monitoring your credit health will help you track your progress, identify any errors or inconsistencies, and make appropriate financial decisions.

Celebrate your progress

Paying back credit card debt is a slow process, and it's important to acknowledge your progress. Whether it's paying a certain amount of money or closing a credit card account, set milestones and reward yourself for reaching them. Celebrating your achievements will help you stay motivated and committed to your debt repayment journey.

Paying off credit card debt requires discipline, patience, and a well-organized plan. By assessing your debt, prioritizing repayments, creating a budget, and exploring options such as balance transfers and professional help, you can take control of your finances and work toward a debt-free future.

Remember, the key to success is consistency and perseverance. Focus on your goal, pay on time, and avoid falling into debt. With dedication and the right strategies, you can overcome credit card debt and pave the way for a more sustainable financial future.