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Credit Card Debt: All About it and How to Settle it

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February 21, 2023


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With companies approaching you to take credit from them, and with a few vibrant cards in your wallet, it is a temptation to take one out and pay for that lavish meal, shop at that crazy sale, or even take that much-needed vacation that you could never save enough for!

But what if you get entangled in credit card debt? How should you get out of it? Your monthly salary or income doesn't allow you to make that full payment, and there is no way of repaying the entire amount in one shot. 

Don't fret! Here are some ways to tackle your credit card debt!

What Is Credit Card Debt?

First things first! Let us understand the meaning of credit card debt! Your finances are under threat if your credit card usage exceeds 30% of the available limit. When using it, you must estimate if you have enough cash or income to pay it off on time.

And the worst scenario is if you have a few of these credit cards, and all of them have been used for more than 30% - it is a debt trap, and you must get out of it ASAP!

It has serious consequences like:

  • A hard hit on your credit rating
  • A high credit utilisation ratio
  • A high Debt-to-income ratio (DTI)
  • No room for savings

Losing out your income on clearing debts each month – which means nothing left for you or your loved ones

Credit Card Debt Examples

So, let's say you have 2 credit cards, and your monthly payment is ₹50,000. Your monthly expenditure is ₹30,000 (excluding credit card payments, and you save ₹20,000 each month.

Credit limit of 1st card – ₹1,00,000

Credit limit of 2nd card – ₹7,000

You use the first credit card to book your vacation tickets and hotel and spend ₹60,000 off it. You use the 2nd credit card to pay for your groceries and restaurant bills and treat your friends for ₹35,000.

So now you fall into a credit card debt of ₹(60,000 + 35,000) 95,000. But your monthly savings only allow you to shell out ₹20,000 each month.

Now, how should you deal with this situation?

How to get rid of credit card debt

Step 1 – Acknowledge Your Debt

Considering your credit card bills, you must understand that you have fallen into the credit card debt trap. It is high time you find a way out of it, or else the compounding interest can be excruciating!

Step 2 – Mind Your Expenses

Cut down on your expenses – don't even think of using your credit card for any other payment. Your priority is to get your credit card balance to less than 30% of its limit.

Step 3 – Start Making Payments That Are More Than The Minimum Amount

Naturally, it won't be possible for you to clear off this debt in a couple of months. This will take time. So, make payments higher than the minimum amount to lower the debt and interest charge.

Step 4 - Consider Debt Consolidation or Take A Personal Loan

Use a 0% balance transfer credit card that can help save money and transfer your outstanding credit card debt to one account. This means making one simple payment, and you don't have to pay interest (limited period).


Although this again means putting yourself in another debt, if you can get a loan with a lower interest rate, it is wise to use it to clear off your credit card debt.

Step 5 - Go For A Debt Settlement

Consider this as a last resort. Showing yourself as bankrupt, and settling the loan in the end with the collections team, may harm your credit score severely. This is only if there is no way to pay your credit card debt.


Now that you know what credit card debt is, follow the basic etiquette of using these enticing cards and avoid the debt trap. The thumb rule is not to go overboard and keep credit cards only for emergencies. This is where Fi Money can help you!

You can take help from Ask Fi, an intuitive personal finance assistant, to get all your credit card-related questions answered. It will also help you build better monetary habits, meet your financial goals and make significant financial choices. 

Learn more about your first credit card here: https://www.youtube.com/shorts/rTdsmKpDlEQ


Fi Money is not a bank; it offers banking services through licensed partners and investment services through epiFi Wealth Pvt. Ltd. and its partners. This post is for information only and is not professional financial advice.
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