Be In Control Of Your Consumer Credit Card Debt
Few people would reject that using credit cards can make day to day life more simple, reducing the need to hold cash and making it effortless to order online and by cellular phone.
Still, paying out with plastic can occasionally be a touch too easy, as it doesn’t always look like you’re actually parting with any cash. Therefore the temptation may be to spend without taking into consideration the consequences too diligently, until you hear the threatening thud of a significant credit card bill hitting the doormat.
If you’ve been trapped in this way, the size of your credit card debt may be overwhelming, but don’t panic – there are still simple measures it is easy to decide on start getting what you owe back under control.
Try and make a bit more than the lowest payments:
The minimum payments required by credit card companies have gradually fallen in recent times. Where once it was typical to have to repay a minimum of 5% of your balance every month, it’s now common to only have to pay 2.5% or 3%. With repayments this small in proportion to your debt, a considerable chunk of each payment gets swallowed up in interest charges. Depending on the APR rate of your card, up to 75% of each payment could be ‘lost’ in this way, meaning that it takes a very long time for your balance to reduce to any great extent.
By aiming to repay more than the minimum, even if only by a little, you can speed this process up, and in the long term you’ll end up paying much less in interest charges.
Put in priority your card debts:
If you have more than one card account with different rates of interest, it feels right to concentrate on the one with the highest interest charges. This means not just the one with the highest interest rate, but the one which actually charges you most each month, which could have a lower rate but a higher balance.
Check your statements to see which card is costing you most in interest each month, and try to pay attention to repaying this card first by putting any spare cash you have into extra payments while keeping to the minimum requirements on your other cards.
Change your card:
The credit card marketplace is very cut-throat, and rates have fallen over the last four years. You may be saddled with an old card charging an old rate that is much higher than newer cards. If you’re able to get a new card with a lower rate and transfer your account balance on to it, you could save a lot in interest charges, assisting you to reduce your debt. If you can get a card with an introductory rate on balance transfers then all the better – you’ll get a few months of interest free credit which you can use to really lower your balance as 100% of every repayment will be helping to get rid of your debt.
Debt consolidation:
If receiving a cheaper card isn’t an option or isn’t something you feel happy about, then maybe a debt consolidation loan would be worth taking into consideration. If you take out a loan and use the money to pay off all your card debts, you could benefit from a lower rate as loans are normally quite a bit cheaper than credit cards.
The side effects to these loans is that the repayment period might be quite long, and so even though your monthly repayments will eventually be lower, you’ll stay in debt for longer and so end up paying more in interest. Done carefully, however, consolidation can be a sound move if there’s little chance of clearing your debt in any other way.
Watch your spending!
All the above tactics for getting your debt manageable will only work if you stop getting deeper into debt – and this means stopping spending on your cards. Ideally, you’d slice them up so that you can’t use them again, but this might not be realistic as you may need to keep them as a credit option in an emergency. In any event, cutting your spending to an absolute minimum will keeping your repayments as high as possible is the only sure strategy to clearing your debt in the long term.
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