Debt is a word which is used in all the cases where there is a transaction of giving and take. So never be under the impression that debt is the term which is used in business only. Debt can be described as an amount that is due to be cleared to the lender. Debt or loan can be taken by anyone irrespective of need.
In business, taking debt is a common phenomenon because a businessman cannot run the business purely with his own money. So, it is quite obvious for a businessman to make debts and clear them within the time limit.
The needs may be the purchase of new vehicle/ jewelry/or some asset or to meet medical treatment or to pay the educational fees or some other emergency need. Whatever may be the case, getting a loan immediately is quite difficult. And even if one gets the loan, it will be charged at a high rate of interest.
So, only when you as an individual are in a position to repay the loan amount, you should go for the loan.
Is usage of credit card a boon or curse?
The name credit card itself means that you can make transactions on credit and repay the banker as soon as the due date arrives.
Normally a banker gives one-month credit to all his customers and if you are a loyal customer that is by paying the due amount within time then the banker may give you additional benefits such as increase of credit limit, or waive off of your debt to some extent or provide you with some rewards such as items or discount coupons.
Well, it depends on you how best you make use of the credit card and repay them in time. In case you are not able to pay the full amount, the banker also provides you with a provision of clearing the due amount by paying monthly installments suggested by them. You can make transactions also simultaneously.
Sounds good, isn’t? So, if you pay the debt amount in time, the usage of credit card can be considered a boon, but if you are a defaulter in paying dues, then the usage of credit card will turn out to be cursed.
The more you transact on the credit card, the more your debt will pile up, and you will land up in legal issues, and the banker will approach a court of law to settle his dues.
How to settle credit card debts?
- First of all, you should go through the invoice raised on you. Normally during the billing cycle, every customer will be given the invoice stating the due amount they need to pay.
- If you find you do all the transactions, then you are bound to pay the amount specified in the invoice. In case there is some sort of mistake in the invoice, it is your duty to report to the concerned authority and get it rectified; else it will be assumed that whatever they have stated in the invoice is true.
- Check out your balances whether you can settle the whole amount. In case, you are not able to clear the whole amount; you can choose the EMI option given by the banker. If you choose this option, you will land in paying additional interest along with EMI’s. There is one more option. If you have more than one credit card, say, credit card 2 and there is sufficient credit limit in the other credit card, then make use of it and clear the due amount of credit card 1. So, you will have additional time to clear off the balance of credit card 2. This option helps you a lot provided you are in a position to manage the credit cards and its payment.
- Approach a good debt settler. You will find a number of debt settlers in the market. Your duty is to select the best among these. Factors like debt settlement reviews will help you in selecting the best debt settler.
There are infinite ideas to settle the debts. You should analyze which one is better for you.
Who faces financial stress?
Normally financial stress is faced by the following people:
- A single earner with a family of 8- 10 people;
- A person who is fully drowned in debts;
- A person who is incapable of managing his funds;
- A person who is not able to control his expenses.
Read: Credit card arbitrage
How to fight against financial stress?
It takes a lot of courage to come to a position and decide to end all this financial stress. You should make a monthly budget of all your sources of income and the expenses you are planning to do.
This practice should be followed every month. So, this will help you in analyzing whether you have spent according to your plan. It is very difficult to stick on to the budget. Sometimes, some emergency expenses have to be done which is not mentioned in your budget.
But you should create a provision to face such consequences. Secondly, you should try to increase your source of income to meet the expenses. Thirdly, you should cut down all unnecessary expenses. The same should be advised to your family members. A proper understanding between the family members will give you support in case of financial stress.
Even if you are not in apposition to make a purchase of their choice, they will try to understand your situation. Try to clear off the debts of particularly small amounts before they land in increasing the interest rate.
Of course, when you are using a credit card, all transactions irrespective of the amount will be billed monthly. The suggestion mentioned above was for the expenses made other than credit card.
Credit cards are introduced to facilitate the customer and enhance his/her purchasing power. The facility should be used positively. Skipping of payment of bills once or twice is excusable but if this is a regular practice, your credit score gets a bad and negative mark, and no other banker will be interested in providing you with credit card services.
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.