Banks in the wake of the pandemic and anticipating higher default are raising interest rate on credit card too (that are already on the higher side). The increase in rate is made on the rates applicable to revolving balances on credit cards as well as late payment charges.
HDFC increased rates from 3.49% to 3.6% i.e. 43.2% per annum and even late payment has also been raised by 16-20% for small overdues (up to Rs. 10,000) and by 50-75% for large overdues ( Rs. 25,000 and above). Similarly RBL Bank has also hiked late payment fee charges and this shall be followed by others too. The rate hike has been made from September.
Here's how to deal with it and avoid paying such higher interest after withdrawing the initially allowed moratorium grant on credit card payment too till August 31, 2020:
And even as some of the credit card issuers such as SBI Card has rolled out a restructuring scheme wherein in the outstanding dues can be converted into a loan for 15-month loan at an interest rate of 13% is not advisable to go by it as per experts as it will mean added debt for a time period of up to 2 years. And this will also include additional interest cost.
Ways to clear credit card dues early and smoothly
1. Review of your financial holdings once in a while can help:
To come out of the crisis at hand and clear your credit card dues which is really burden some, you once in a while can review your financial portfolio and get rid of all the dud investments such as too many conventional life insurance policies or mutual funds that failed to earn good returns over time, this exercise may provide you with enough funds to reduce your credit card debt.
2. Digging out your EPF savings can be another option:
Though taking a plunge into your retirement savings is suggested to be taken as a last resort, if you face a high debt on your credit card. As because of the withdrawal from your EPF, you miss on the compounding benefit at the time of final redemption or maturity of the account.
Nonetheless, in such a crisis, you can still dig into your EPF savings and amid the pandemic providing relief to EPF subscribers, the government has allowed withdrawal of funds from EPF partially which can be up to 75% of balance or 3 months' wages, whichever is lower, as non-refundable advance.
3. Opt for balance transfer:
As with other high ticket loans such as home loan, balance transfer facility is also available on credit card debt. And herein the borrower can transfer his debt to another financial institution at a lower rate, which may help the credit card holder save significantly.
Other help here is that the new card issuer to whom the credit card debt is transferred offers a promotional interest period of 2-6 months, during which it levies no finance or lower charges.
4. Consolidation of credit card debt can be done by opting for personal loan:
If you have too many credit cards to service then consolidation of such a debt can be also done by taking personal loan which comes with two advantages lower interest rate in comparison to credit cards as well as payment tenure flexibility.
Secure A Secured loan
In case your credit card dues have accumulated substantially because you opting for the moratorium facility granted in view of the pandemic, you may even try to pay it off by securing some secured loan such as gold loan which is easy to get and attract the lowest possible rate of 7.5% per annum.