Today is 15 August, a special day of freedom, independence, and light for Indians across the globe. This is the perfect day to start afresh and devise a meaningful economic planning and investment strategy to achieve financial freedom in the long run.
Furthermore, financial freedom today is generally associated with earning more, having liquid cash to spend, saving consistently, and building long-term investments. Still, for many households, the first step towards financial independence is simpler; it is first about getting out of expensive debt.
This is because having expensive assets, immense wealth, and savings are inconsequential if an individual holds an equal or higher level of debt. This becomes even more complicated when credit card debt comes into the picture.
This is because a credit card can be a useful tool for managing short-term expenses and earning rewards when used responsibly. Still, carrying unpaid balances from one month to the next can add to psychological stress and become a costly financial burden due to high interest charges. These features make credit card debt one of the biggest obstacles in achieving financial freedom and long-term economic prosperity.
Raj P Narayanam, Executive Chairman, Zaggle, touched upon this aspect in detail, stating, “Credit card debt is the most expensive debt most Indians carry and the most avoidable. The path to breaking free starts with one rule: never carry a balance. Pay your full outstanding every month, not just the minimum. If you’re already in debt, stop using the card, prioritise clearing the highest-interest balance first and consider converting to an EMI at a lower rate. Financial freedom isn’t just about earning more, it’s about owing less.”
Why paying only the minimum can be costly
One of the biggest mistakes credit card users make is paying only the minimum amount shown on their monthly statement. While this may prevent the account from becoming overdue, the remaining balance continues to attract interest and can take much longer to repay.
A better approach is to pay the total outstanding amount by the due date whenever possible. This can help avoid finance charges applicable to carried-forward balances, subject to the card’s terms and conditions.
For those already struggling with multiple balances, listing all outstanding dues along with their interest rates can help bring clarity. Paying off the highest-interest debt first while making the required payments on other dues can reduce the overall interest burden.
Stop adding to the debt
Repaying debt becomes challenging if new expenses continue to be charged to the same credit card. To avoid such a situation from rearing its head, it is wise to temporarily stop using credit cards and aim to break the difficult cycle of debt.
In case repayment in full is not immediately possible, borrowers can have a clear discussion with their credit card issuer about available repayment or EMI options. Still, all associated aspects of the same should be considered and evaluated carefully, including interest rate, processing fees and total repayment amount.
Eventually, financial freedom is not determined only by how much an individual earns. It also depends on how efficiently and effectively they manage what they owe. This Independence Day, having a clear understanding of these concepts and taking control of credit card debt can be a meaningful first step towards greater financial independence.
Therefore, the goal should not merely be to have more liquid cash and funds in hand, but to have fewer financial obligations standing between you and the life you aspire to build.
