How to Come Out of a Credit Card Debt Trap?


While credit cards have emerged as one of the most convenient modes of payment that offer several benefits in the form of discounts, rewards, etc., they come with an associated risk. Even a slight delay in the credit card bill payment could be hard on your pockets by way of late fees. Given the fact that credit card debts attract heavy charges and penalties, it can lead to a financial crisis situation even before you can grasp the gravity of the problem.

In addition to that, it affects your credit score adversely, which can have a significant bearing on your borrowing capacity in the future. Therefore, it is imperative to pay off the credit card debt as soon as possible.

Here are three tried and tested ways to get out of the credit card debt trap without costing yourself a fortune.

1. Convert Credit Card Balance into EMI

Many credit card issuing companies offer the facility to convert the outstanding credit card loan amount into EMIs. By converting it to EMIs, you can repay the entire debt in smaller amounts as per your convenience and repayment capacity.

However, you should note that most banks charge an interest rate for converting the outstanding loan amount into EMIs. Even then, it is a cheaper option because the interest rate for converting your outstanding amount is much lower than the late fees charged on your unpaid credit card dues.

Since the interest rate varies based on the loan repayment tenure, it is wise to choose the shortest term possible to reduce the interest burden. You can seek the counsel of a credit card settlement agency to decide the optimum loan repayment option.

2. Transfer Your Debt to Another Credit Card Issuing Company

The process of transferring your outstanding debt balance from the initial company to another credit card issuing company is called Balance Transfer. By leveraging the transfer facility, you can transfer the loan to a credit card issuer that charges a lower interest rate.

Some credit card issuing companies also offer a teaser rate wherein you have to pay a minimal interest rate for a particular period of time. However, due care must be taken while choosing the credit card issuing company to which you want to transfer the balance. Do a comparative analysis of the interest rate offered by different companies and then select the one best suited for you.

3. Take a Personal Loan

Another prevalent credit card debt settlement option is to take a personal loan. This option is particularly effective when the debt amount is enormous. Taking a personal loan is a smart choice because there is a vast difference in the interest rate of credit cards and personal loans.

While credit card providers usually charge an interest rate of around 40% p.a., the interest rate for personal loans is as low as 11%. However, you should note that you might not be eligible for a personal loan if you have too many loans sanctioned in your name. This is because too many outstanding loans reflect bad credit behaviour, and the banks may refuse to issue a fresh personal loan.

Even if you are eligible for a personal loan, due care must be taken to ensure that the interest on the loan is paid on time, or you can further aggravate the debt burden on yourself. It is suggested that you seek the help of a credit card debt settlement agency that can guide you through the various

Bottom Line

Remember that unpaid credit card debt not only has a bearing on your credit score but can also have legal implications and put you behind bars in worst-case scenarios. Therefore, the best thing to do in such a situation is to reach out to a credit card settlement agency that knows this sector inside out. Freed has been offering debt-relief services to its clients along with a Creditor Harassment Protection Program (CHPP) that is aimed at providing pre-litigation assistance and protection against unlawful collection from creditors.

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