Helpful Ways to Erase Credit Card Debts With a Personal Loan
A credit card is a handy solution for making purchases if you do not have cash on hand. However simple and convenient it may seem, it can lead you to financial troubles if you neglect to pay on time.
Knowing the right solution to be debt-free from your credit card obligation can ease the financial burden and help you regain a good credit score.
Read more to understand how a credit card works and how to get out of credit card debt.
What is Credit Card Debt?
A credit card debt is an amount you owe your credit card company or issuer from the purchases you made through the card.
This amount includes the interest on the purchases and penalties incurred if you do not pay on time. If you disregard monthly payments, your debt can accumulate over time.
How Does Credit Card Debt Work?
A credit card is categorically a short-term loan. It allows you to purchase online or in physical stores and pay bills.
When you use your card for a transaction, you also authorize the merchant’s bank to process the transaction through the credit card network.
Your card issuer also verifies the details of the transaction before approval. Transactions can be declined if there is no longer available credit left on your card or if fraudulent activities are detected.
Once approved, the payment is made to the merchant, and your issuer will reduce the amount on your credit.
By the end of your billing period, your card issuer will send you your billing statement indicating the transaction you made within the period.
It also shows your previous and new balance, which you must pay with no less than the minimum charge before the due date.
If you pay your bill before the due date, there will be no interest charges. However, charges will be added to your new balance once the due date passes. Once that happens, you are stuck paying interest charges EVERY month.
Different Types of Credit Cards
Credit cards are available in the market to suit every type of consumer. You don’t have to get all of these. All you need is to learn the use of each to know what works best for your financial situation and goals.
The most basic and standard credit card is the traditional card that operates through major credit card networks – Mastercard, American Express, Discover, and Visa. If you have any of these cards, you can use them for purchases worldwide.
A rewards credit card gives you cash back, discounts, points, and airline miles that you can use to make transactions. You can book a trip, pay your bills, and do other transactions through this type of card, which presents an added value to every expense you make.
Premium Rewards Cards
A premium rewards cardholder has more perks to enjoy than basic rewards cards. It comes with more extensive perks, such as high rewards rates for spending, bigger redemption options, and even travel credits.
However, this card type is not for everyone. Card issuers usually offer this to consumers with a high credit score.
Balance Transfer Cards
A balance transfer card allows you to transfer balances from other accounts. It has a zero-interest introductory offer for a given period. This card helps manage high-interest credit card debts, allowing you to pay off debt while having a break in interest charges.
If you don’t have the capacity to pay your bill in full, you can get a low-interest credit card with a 0 percent intro APR for a limited time or even past the introductory offer phase. This card can carry a balance while you pay your debt.
Retail establishments offer you retail cards to add value to your shopping experience.
This card is provided for shoppers depending on their spending patterns. It can grant you reward points, air miles, cash back, and exclusive discounts, among others.
Gas stations offer credit cards for their customers to use when purchasing gas. It comes with perks such as discounts and cash back.
Credit cards are typically unsecured and don’t have to put collateral.
But a secured credit card requires a cash deposit to allow you a small line of credit. This is often a good start for people who want to build credit from zero or repair credit.
How to Get Out of Credit Card Debt
Many people suffer from credit card debt due to financial struggles, but there are effective ways to reduce and also eliminate the struggle. Dealing with accumulated debt can be a challenging task. The first thing you need to do is to find the right payment strategy to follow.
Pay more than minimum
Although minimum monthly payments from banks can be an ease for you if you have current financial problems, these typically make you pay interest charges for a more extended period. If you can, pay beyond the minimum payment requirement so you know your debt is decreasing over time.
Focus on paying off the small loans first. Use this payment to make more significant payments as you tackle each loan in the pipeline. Slowly, you get to deal with bigger loans and erase your debt.
Instead of paying the lowest balance, you start paying the debt with the highest interest. This method is faster and cheaper.
Automate your payments so you will not miss a deadline and incur costly penalties.
Consider debt consolidation
Debt consolidation lets you gather all debt payments in one account for easier monitoring and payment process.
Zero % balance transfer credit card
A transfer credit card that offers a 0% balance is a way to save money from charges. This type of card offers zero interest during an introductory phase, which can range anywhere from 6 to 18 months. By transferring all your outstanding balances to this account, you can save money on interest rates for a period, easing your financial burden.
You can pay off all your credit card debt by applying for a fixed-rate debt consolidation loan or a personal loan.
Although there is still interest on top of the loan and additional charges for processing, the fees and interest rates are generally lower than what credit cards impose.
Alliance One Funding offers debt consolidation and personal loans to fund your debt. We can help you handle your loans, including your credit card debts and collect them in one account for easier payment. Contact us today for a consultation!
If you struggle in getting out of credit card debt, you can seek assistance from a different financial institution to help you tackle your situation.
Alliance One Funding can help pay off credit cards with our Personal Loans and debt consolidation plans. We can help you manage your current debt by arranging all your loans into one account and eliminating stressful calls from creditors.
Our financial officers are here to guide you every step of the way so you can focus on rebuilding your financial freedom.
Schedule a free consultation with our representative to guide you on the proper steps. Talk to us and start a debt-free life today!