Four Ways To Fight Credit Card Debt
Aside from mortgages, credit card debt is probably the most common form of debt UK consumers have today. The ease of use of plastic, not to mention the heavy marketing muscle deployed in its promotion, mean that many people have racked up substantial balances.
In the days of cheap and easy credit, this wasn’t necessarily a problem – many people constantly shifted their debt around from card to card, avoiding interest charges through the use of introductory 0% balance transfer deals. Those days are now all but over, as balance transfer fees couple with tighter approval criteria mean that this strategy is hard to maintain, and so the issue of debt has got to be addressed.
It may seem obvious, but the first step towards getting your credit card debt under control is to stop spending – as the saying goes, when you’re in a hole, stop digging. And if you really must use a card, at least try and take advantage of a 0% purchases deal and clear what you’ve spent on a monthly basis.
Use Balance Transfers
Although as noted above, balance transfers are harder to come by and a by no means a long term solution to debt, 0% deals can still be useful to give some breathing space and a head start in clearing your debt. Just be sure to use the opportunity to clear as much of your balance as possible while not being charged interest, rather than as an excuse to pay as little as possible each month.
Lifetime balance transfers can also be useful, letting you lock your debt to a fixed low interest rate for the lifetime of the balance.
Pay More Than The Minimum
If you only ever make the minimum payment requested on your credit card statement, your debt is going to hang around for a long, long time, and cost you plenty in interest. With today’s low minimum payment percentages, in many cases your monthly bill will barely cover the interest charges, especially with many cards upping their rates recently. Even paying a little extra each month can have a dramatic effect on how fast you clear your debt, and this really is an area where every little helps. Every penny you can put towards reducing your balance rather than paying interest will increase the effectiveness of every penny you pay in future months, and the cumulative results can be dramatic.
If you can find an unsecured loan with a lower rate than your credit card, and can spread the repayments over a long enough term so that your monthly payment is reduced, then this can be an effective way of dealing with card debt. There are two things to bear in mind, though.
Firstly, you may well find that it takes longer to clear your debt completely in this way, and in that case you’ll end up paying more in interest overall. However, the benefits of having a fixed, lower monthly bill will probably outweigh this.
Secondly, you should never take out a secured loan to consolidate unsecured debts such as credit cards. Being in debt is stressful and expensive, but being in debt and losing your home is much worse and sticking to unsecured credit makes this outcome much less likely.
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