Effective Management of Credit card Debt and Stress


One must strive for a debt-free living. However, when one has fallen into unsecured debt due to variety of reasons, one has to acknowledge that s/he is in problem that requires streamlining finances as well as managing stress in order to gain control over the situation and secure the future.

The Royal College of Psychology provides a simple talisman in the context of debts and mental health which is shared here verbatim.

  • Don’t ignore debt – it will only get worse.
  • Explain your problems to someone you trust.
  • Be sure to get expert independent advice.
  • Take control of your money and spending.

Taking concrete steps such as the following may help.

Connect with your support system. It is important to explain one’s situation to close, trusted people who are only interested in your well-being and may help in practical ways that shows care and help you in drawing a plan to relax, exercise and reduce stress and anxiety. It is a reinforcement of the fact that one has a support system. Try not to be embarrassed or think of stigma. Debt situation is commonplace and it is not a verdict on one’s cognitive or decision-making abilities or life in general.

Take stock of your debt situation. It will help to put together a financial sheet with list of all creditors, how much you owe to each one of them (including late fee and interest charges), what are the payment due dates, options offered by the creditors and email and phone numbers of designated point of contact to initiate communication. You must also prepare a monthly budget that will help in understanding various liabilities, their periodicity and plan how to fulfil them. It is important to cut down on discretionary expenditure till one has paid off the high cost debts. Any further credit card payment or ATM withdrawal must also be paused till that time.

Most financial advisors recommend paying off debts strategically, which means to address the higher value outstanding (and commanding higher interest rate) first and then move to the next high value debt. What can ease full payment of a debt in one go is reliance on liquid assets, Fixed Deposits or Debt Mutual Fund. There are different opinions with respect to dipping into EPF since it offers good interest rate and is usually considered a reserve for retirement. In the present pandemic situation, it must be considered as amongst the last options. According to Raj Khosla, Founder and Managing Director,, ‘It is recommended to liquidate low yielding investments like bank FDs or debt mutual funds to pay out high cost debts.’

Scheduling quarterly check up of money inflow into your bank account and its outflow and rationing the unnecessary is one of the most positive actions one could take during indebtedness that will eventually build a habit for healthy living Seek help from an accredited Debt Advisory entity. Having understood one’s financial situation and before taking a financial decision, it is advised to seek help of a consumer friendly debt advisory entity that would counsel, inform you of your rights as a defaulter, guide you in restructuring your debts and link you with legal advisors where required.

There are several practices in India pertaining to debt management on credit cards. Broadly, there are 6 options, a mix of technical and practical ones that is available with a credit card defaulter.

The first option involves breaking your investment and paying off the total outstanding. When one has sufficient liquid assets in bank accounts or FDs with which one could pay off the total outstanding and also takes care of routine expenses of next few months, this is the best option.

The next option is to pay off the total debt in 5-6 instalments. Instead of focusing on payment of minimum balance that safeguards you against penalty but keeps the monthly interest adding to the total outstanding amount, it is wise to pay 3 or 4 times of minimum balance each month and clear the debt within a year or reasonable period that you could manage.

Option 3 involves taking some loans from friends/family that can ease in pay off the debt. Though interest free, this is neither a self-reliant practice nor is accessible as an option to all defaulters and involves self-discipline in repayment absence of which may affect personal relations with the borrower.

Option 4 involves taking personal loans (with no collateral requirement) from bank and pay off the outstanding. Interest on personal loan is comparatively much less compared to the 40% interest rate on credit cards on yearly basis. It is further advised that if one has an ongoing home loan, one could think of top-up loan which will have even less interest rate compared to personal loan.

Option 5 involves converting the credit card debt into EMI option for a manageable tenure up to 12 months. The interest range depends on the lender but is still less than the interest on credit card.

The last option is the balance transfer which involves ‘transferring the pending dues to another financial institution that offers you an economical rate of interest’. Thus the debtor can consolidate the outstanding amount from various credit card accounts into one. This option is recommended for clearing debts in the short term.

Another practice involves asking the credit card provider for ‘Settlement’ when you cannot exercise the above options to pay off the outstanding amount. When it is established that you cannot clear the debt, the bank may reduce the payable amount to its discretion. It is in the bank’s interest to settle the debt so that it does not become a bad loan. Debt settlement does impact the credit score in short term, however with strict financial discipline, one can overcome the problem and build the score again to be credit worthy in future. If you wish to explore options on debt settlement, please visit

Take care of yourself. While one is dealing with the financial situation, it is important not to neglect one’s health and eating well, relaxation, exercising and nature-walk is essential. Do not brood over the matter. Practice empathy for yourself.

‘Doing what Matters in Times of Stress: An Illustrated Guide’, a publication by WHO is a wonderful navigating resource for anybody in stress, deconstructing the concept of stress and offering useful exercises. It says that in stressful situations, difficult thoughts and feelings hook us and pull us away from our values or how we want to be as a person and relate with the world. The remedy is to acknowledge those thoughts and let them rest in us while we must fully engage in our lives, paying complete attention to others and live by our values. Stress management is about making room for the bad weather, just like the sky but not be overwhelmed by it or rather to unhook from stressful thoughts and feelings, and ground ourselves better in our world, giving full attention to family and friends and live by our values.

Positive thinking, action and seeking out timely support can surely help one tide over financially distressful period in life, learn some life lessons and build one’s future with corrected financial behaviour and planning.

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