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Sunday, 27 November 2016

How to reduce your Credit Card burden?

Credit Cards, though it sounds a very handy instrument for taking short term bank credits for paying off or making any purchase, it is at the same time, most painful thing that drives you off track from your financial planning. Many people land up in severe long term debt when it comes to repayment on credit cards. This is where banks take complete advantage in extending these so called credits with high interest rates ranging from 36 to 48%. It is advisable to know the in and out of how a credit card functions and how you should handle it. Foremost, it is wise to avoid using any credit card for your lifetime unless it is a severe personal emergency.

For the customers who are already using credit cards, there are a few clear instructions people must follow. 

Directions to using a Credit Card

1. Avoid using a Credit Card - Foremost,  avoid using credit card for any purchase online or at any merchant outlet. The older methods still work better in case of any emergency, borrow a loan from bank or borrow money from a friend or family member.

2. Convert to EMI - Most banks allow facility of converting your transactions to EMI to repay any purchase that you would have done on your credit card. Banks often allow to chose an EMI option while making an online payment. Other banks also allow you to convert the amount to EMI after the transaction is done, for an amount greater than an amount usually Rs 3000/-.

3. Maximum payout every month -  Start making maximum payment every month out of the debt on your credit card. Make sure that you don't just pay only your the so called 'Minimum amount due' but clear off the maximum amount over and above the minimum amount due every month on your credit card. Ensure to clear off the maximum amount as per your potential every month and gradually increase the repayment amount post each month. Clearing off a higher amount than the due amount every month is a good practice be it any kind of loan - Personal loan, Credit card debt or home loan.

4. Try settling your Credit Card account - If it is already a huge burden, say an amount of over 50k to 1 lakh that you are finding difficult to pay off, try settling the amount with bank. Speak to the bank to settle at a negotiated amount, banks usually allow to settle off remaining payment with reduced interest rate. This can be a big relief, but the only point here is you will not be able to use the card further. You can go for moving to any other credit card, though not advisable unless it is a real emergency to use credit cards.

5. Opt for a cheaper bank loan to settle your balance - It would be rather a better choice to go with a bank loan personal to settle off your remaining balances than paying huge interests on credit cards. Even a personal loan would be off far less interest rate you can expect upto 14-18% rather than credit card interests ranging from 36-48%. 

6. Talk to bank to reduce interest rate - If you are a good credit worthy customer of your bank, bank may consider reducing your interest for the repayment of remaining credit on your account. You must speak to the bank customer care to negotiate on interest on the remaining balance.

7. Make early payments - Do not wait till the due dates to make payments as the banks charge interest day wise on your credit cards. Make payments soon you have it to clear off or soon as when your salary gets credited.

Know that consistent pending balances and failure of repayments has an impact on your CIBIL rating and credit score. Make sure you review your CIBIL rating with banks regularly, or it becomes difficult for you at a later stage while procuring any loan from the bank.

Handling Credit Card disputes/grievances

Even if you are using a credit card, it is highly necessary that you monitor your expenses regular and have a definite plan to repay the balance outstanding. However, worst cases you might as well land up in a situation of dispute, where you must take the right step, here are a few tips:

1. Approach Bank Credit Card Customer Care -  At the first point, know that every bank has a separate credit card customer care number to approach directly for any queries or raising any concerns with respect to your credit card. Every bank has a grievance redressal process where you can reach bank grievance email or for any escalation of your request.

2. Keep all documentation ready - Make sure you download all your credit card statement from the Net banking or you can request the bank directly to send 12 months statement to your email account or request to send hard copy on your postal mailing address.

3. Make all communications in writing - Ensure you have all communications done with the bank in writing. Every email sent to the bank has a request number created that you can reference for making any further communications with the bank. 

4. Do a self assessment - Always do a proper self assessment of your transactions referring to a detailed credit card statement. Clarify any doubts asking the bank customer care if you have any queries with respect to any items and interests charged. Make an excel sheet clearly listing all the purchases on dates, interests charged, payments done against those purchases. This will help you to analyze your balance outstanding and future repayments.

5. Approach Banking Ombudsman - Few people know that there exists a banking ombudsman which can be reached if your complaint is not heard within 30 days of lodging your complaint with the bank. Banking Ombudsman are the people appointed by RBI in every city to handle such consumer complaints. Few reference links are as below:

Your communication to the BO should be within one year of the event you are complaining about

6. Approach the Appellate authority - In case if you are still not satisfied with the decision by Banking Ombudsman, you can reach the Appellate authority, who is the Deputy Governor appointed by RBI. This should be filed within 45 days of your receipt of response from Banking Ombudsman. 

Hope the above guidelines will bring some relief and add as a flux to your financial planning journey. All the very best to you !!

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