Can't Pay Full Credit Card Bill? Here's A Good Cheap Option

Credit Card outstanding can take a toll on your finances, simply because they come with annual interest rates of 36 to 40 per cent per annum.

You suddenly realise that you never end-up paying your credit card outstanding simply because the interest is so high on outstanding balances, you are just servicing the interest. Now, to carry on like that would be foolhardy because of the exorbitant interest rates. However, there is another option that you can use.

Convert the credit card outstanding into a personal loan

Many banks may allow you the option of converting your credit card outstanding into a personal loan. In fact, if you have been paying your credit card bill regularly a bank executive may call you and ask you if you want to convert your outstanding amount into a personal loan EMI.

The interest on this personal loan may vary. Many banks charge an interest rate of 14-18 per cent per annum. There is also a service tax that would be applicable if you plan to convert the same.

This is far better than paying an exorbitant interest rate of 36-40 per cent per annum. You need to work with your banker if you wish to convert the outstanding credit card amount to a personal loan. Not all banks may agree to the same. Why should they lend you at 14 per cent when they can earn as much as 36 per cent.

Read between the lines when you get a call from bank executives

Almost every week you may get a call from a bank executive to top-up your personal loan or convert your credit card outstanding to an EMI. This is only when you are highly creditworthy and have never defaulted in payment of your dues.

Let me give you an example. Recently a private sector bank executive called and asked if I want to convert my outstanding credit card bill to EMI. The reason was simple. I was paying my full credit card outstanding after the stipulated 45 days and before the due date. What this meant was that the bank was not gaining anything from me, as I was using the grace period of 45 days fully. For the bank it was losing interest on those 45 days.

So, the better idea would be to convince me to take an EMI, by which the bank would at least gain interest.

In case you have a personal loan and are honouring your monthly commitments, they would coerce you into topping the loan. So be careful.

You can take a personal loan to pay your credit card outstanding only when you lack the capacity to pay the entire bill.