Bringing Your Credit Card Problems Back Under Control

Credit cards can be extremely convenient in everyday life, making it a lot easier to shop and pay bills online or by phone. This ease can sometimes be a double-edged sword though, as it can easily seem like you're not spending any real money at all when you hand over the card.

It's all too easy to flash the plastic without really considering the consequences - and then only see the reality of your profligacy when your outsized credit card statement comes through the door.

Repeat this a few times and the resulting debt can quickly seem impossible to deal with, but that's not necessarily the case, and by following a few basic strategies you can at least begin the process of bringing your credit card debt back down to more handleable levels and easing the problems it causes.

Paying More Than The Minimum Makes Sense

The minimum repayment figure shown on your monthly statement, as a percentage of the total balance, has fallen inexorably over the last decade or so. In the early days of credit cards it was normal to have to repay at least 5% each month, now the more typical figure is 3% or even 2.5%.

This means that the repayment is often barely enough to cover the interest charges on the debt, so most of each payment is lost to interest without actually reducing the balance very much at all. In some cases, up to 75% of each repayment goes towards paying interest, and so your actual balance is paid down only very slowly.

If you can afford to pay more than the minimum charge, even if it's just by a small amount, then every penny will go towards reducing the balance and lessening the amount of interest you pay over the long term.

Put Your Credit Card Debts In Order

Different credit cards obviously have different rates of interest, and so it's only common sense that attempts to reduce debt should concentrate on the most expensive ones, to make your payments go as far as possible. Note that the most expensive card isn't necessarily the one with the highest interest rate, but may be one with a lower rate but a higher balance - and so higher interest charges overall.

It's easy to find which card is costing you most in interest each month, as this information is shown on your monthly statements. Putting any extra cash you have into reducing the balance on these cards is an effective way of prioritising your credit repayments.

Get a New Card

Interest rates globally are at record lows, and this is reflected in the credit card market too. Your current cards may be charging interest at a rate set years ago, and much higher than the average today.

Making a balance transfer to a new card with a lower rate is a quick way to save on interest charges, and can have a dramatic effect on how quickly your debt is paid down. A 0% balance transfer card can be even better, giving you a set period of no interest whatsoever, meaning your entire repayment goes towards driving your balance downward.

Consolidating the Debt

Maybe you can't get a cheaper card, or maybe you don't want to increase the amount of credit cards in your wallet - in these cases, maybe a debt consolidation loan is an option to think about. Paying off all your credit cards by taking out a loan could save you a lot in interest, as you'll likely get a better APR on a personal loan than the average credit card offers.

Bear in mind though that even if your monthly repayments are lower with a consolidation loan, you may be taking longer to repay and so in the long term you might pay more in total interest - the choice is yours. So if you choose to go down the consolidation route, it can be very effective so long as you work out the figures first.

Keep Track of What You Spend

No matter what you do to reduce your debt, there's no point if you carry on spending above your means - so quit spending on your cards.

In a perfect world, you'd cut up all your cards to remove the possibility of spending on them. Unfortunately, emergencies happen, so it might be a good idea to keep at least some accounts open. But always bear in mind that the only way out of debt is to spend as little as possible, while repaying as much as you can.