Smart Tips For Credit Card Users
With credit card spending on the increase many cardholders are finding it extremely difficult to stay on top of their debts and either reduce or clear their credit card balances. Figures show that the average outstanding balance for UK credit card holders is now topping the £2,000 mark,
The increased cost of living, elevated mortgage rates and rise in inflation are just some of the factors which limit card holders from paying off any more than the minimum repayment due on their credit card each month. For many it seems that there is no way out of a spiralling debt however with careful management and a strict budgeting plan in place, reducing that balance to zero could be within reach.
If you're finding trouble paying off all your credit cards and in danger of damaging your credit score, then you may want to consider a debt consolidation loan.
Tips for wise use of your credit card:
- Stop further spending The immediate quick fix to prevent further increase in your credit card balance is to refrain from making any further purchases with the card. Although this will not stop any interest being added to the already outstanding balance, it will control how long it will actually take to pay it off. The higher the balance, the longer it will take to pay off, which in turn means the more debt you will end up owing. The obvious way to stop further spending is to literally cut the card up or hide it away only using it in true emergency cases.
- Transferring the balance With so many credit card deals now available competition is fierce. By comparing the market you are sure to find a credit card which offers a better deal. Perhaps those cards offering the longest period on their 0% balance transfers could be a viable option in steering clear of any further interest charges. Making payments on a 0% balance transfer card allows you to pay off the actual capital as opposed to the added interest. There is however a fee, usually between 2-3% for the initial balance transfer although this still works out to be considerably cheaper than a higher rate of APR. If you find a credit card with an interest-free period of up to 12 months, make sure you are able to clear the debt within this time span otherwise the rate you will be charged will be substantial. Just before the 0% period terminates shop around for another 0% deal to avoid paying any heavy interest charges.
- Pay more than the minimum Where you can, try to overpay on the minimum monthly payment in order to reduce the repayment term. Paying only the minimum requirement, usually set at 2% of the outstanding balance, means your debt will take a longer to clear. Always pay your credit card payments on time too as penalty charges of £12 will be added. Again this only further adds to your debt. Setting up a direct debit from your bank account is a good way to ensure you do not default on a payment.
- Use your savings In general most savings accounts do not reward beyond a 5% interest rate, whereas the average APR on a credit card stands easily at whopping 15%. So unless you have a credit card which offers 0% interest it would be far more practical to use any savings to clear off your credit card debt and then resume your savings debt-free earning a real benefit in returns.
- Stick to a budget In order to clear off any debt you must be prepared to make cutbacks and stick to an affordable budget. This will help pay off your debts quicker and reduce the overall amount you pay back. Avoid taking on any other debts i.e. additional credit cards, store cards, loans and overdrafts until of course you have completely paid off what you already owe. Above all be realistic with your budget when outlining what you can and cannot afford to pay in order to facilitate staying within it.
Here at the MoneyOutlet we help you compare best deals on credit cards and loans. By determining your current credit situation a credit card with 0% balance transfer may be able to help you pay off your other cards, after transfer, without incurring any more interest.
If you are finding it difficult to repay all your cards, then obtaining another credit card may not be right for you. You may want to consider a low rate personal loan or even speak with a debt management consultant. It is highly recommended that you actively maintain a good to excellent credit record and borrowing credit can be a great way to develop a good credit history if you follow some of the tips above.
Published on September 29, 2007
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