Credit Cards are convenient instruments. It is true as long as you use them smartly. The moment you enter the trap of paying the minimum amount due, you are inviting disaster. It is because the interest rates on your Credit Cards are the highest among all other loans in the industry. The interest rates are in the range of 36% to 42% per annum. If you miss any payment, you have to pay the late payment penalties as well.

The debt trap

Credit Card issuers allow cardholders to pay any sum equal to or more than the minimum payment due every month to keep their cards live and functional. The minimum due amount is usually 5% of the outstanding amount on the card.

However, there is a catch to it. The moment you make a part-payment of your Credit Card bill, you lose the benefit of the interest-free period until you clear the entire outstanding amount. It includes the present outstanding amounts as well as the debts you will incur in the future. Secondly, the rate of interest is a minimum of 36% per annum. Hence, even a purchase of Rs. 10,000 will entail payment of interest of Rs. 300 per month.

Hence, it makes sense to clear off your high-costCredit Card debts first. Let us see some simple ways to do so.

  • Try for a balance transfer

Many Credit Card issuers have products that allow you to transfer the balances from other Credit Cards. Some of the issuers allow you to pay the balance amount at 0% EMI (Equated Monthly Instalment) within a specific time frame. The period can range from a minimum of 6 months up to even 18 or 21 months. You might have to incur a balance transfer fee of around 3% to 5%. Some cards do not charge the balance transfer fee as well. Hence, you should search for such cards. Access the websites of Credit Card service providers like and search for all Credit Cards at a single location. You can also use the facility to Apply for Online Credit Card.

The ‘all bank Credit Card apply online option’is the best way to get rid of your high-costCredit Card balances.

  • Go for a Personal Loan

Apply for a Personal Loan to clear off your high-costCredit Card debt. Different banks have various PersonalLoan products. The rates of interest on a Personal Loans are around 14% to 15%. It is any day better than the 36% you pay on the Credit Cards, isn’t it? You will clear the Personal Loan in easy EMIs. Banks offer these loans for periods ranging from 12 months to 60 months. Choose the most appropriate Credit Card from a range of cards on display.However, you should ensure to maintain fiscal discipline in the future. Once you clear the Credit Card balance, the limit will be available again for use. You should exercise restraint and use the card wisely.

  • Opt for a secured loan

Your Credit Card and Personal Loans are unsecured loans. Hence, they have a higher rate of interest. Banks are also cautious while approving such loans. They insist on an impeccable credit record with a good credit score. As you have defaulted on your Credit Card payments, the chances of having a high credit score are less. Hence, going for a secured loan is a viable option.

You can pledge your gold ornaments and take a loan against them. You can also assign your LIC policies and avail finance up to 90% of the surrender value amount. You can also go for a Loan against Property (LAP). Banks give LAP up to 90% of the property value. All these options are better than the Personal Loan option because these secured loans carry less interest than the Personal Loans. Secondly, the banks have favourable eligibility criteria when it comes to processing secured loans.

  • Take a soft loan from your friends, relatives, or your employer

Your friends and family know your debt position better than the bankers do. They can help you come out of the financial mess. You can also opt for a loan against your Provident Fund balances. The rates of interest are lower than the rates charged by the banks on the secured loans. You will be repaying this loan within a shorter period as well. Taking loans from friends, family, and the PF loan option does not have any effect on your credit score.

We have seen four options to pay your high-costCredit Card debt. Choose the one that suits you the best. However, you should remember to exercise fiscal discipline in the future and not run up such high-costdebts again.

Also Read: Globetrotters Guide to Credit Card Advantages

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