In some situations, credit card users may be overwhelmed by the quantum of debt that they have in their credit cards and may look at ways to repay the debt. Often, people take wrong decisions on repayment that will in fact, increase their total debt rather than lessening it.

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Some of the most popular wrong options that customers select to repay debt on credit cards are:

Taking a cash advance from another credit card

Often people take a cash advance from one credit card to repay debt on another credit card. This is a wrong way of managing money because cash advances carry higher fees and also a very high interest rate. Considering the fact that the borrower was motivated to avail the facility because of lack of availability of cash, it may be expected that he or she will not be able to pay back the debt soon. This would mean that the debt will increase in value in a short period of time because of the high interest rates that cash advances attract.

Availing a pay day loan

Even though a pay day loan is a means to obtain cash at short notice for a very short period of time, it must never be used to pay off long-term debts such as credit card debts. This is because the fees and interest of pay day loans and very high that often debtors end up paying significantly more than what they had originally availed.

Withdrawing from retirement savings

Even though withdrawing from retirement saving such as 401(K) is advantageous because money can be availed as lesser rates and because of the fact that interest will be paid back to replenish one’s own savings, the cumulative costs can cause further cause financial strain on the borrower. Therefore, it is definitely a bad idea to withdraw cash from retirement savings plans to pay back credit-card debts.

Opt for a home equity loan

Availing a home equity loan puts the house that one owns in danger. Therefore unless one is a very disciplined money manager, it is best advised to avoid taking a home equity loan fro repaying credit card debt.

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