Most adults are in debt of some sort, be it a mortgage, overdraft or car finance. Debt in itself is not inherently bad – there would be little homeownership without it – but it is when debts become unmanageable that they can have a destructive influence on the individual’s life.
One of the most common ways in which debts get out of control are through excess spending on credit cards. The purchase of everyday items on credit – even relatively low-value items – can soon build into significant owings, and with each purchase the interest which needs to be repaid each month. Missed payments incur charges, and borrowers often find themselves slipping into a debt spiral that can be extremely difficult to break free from.
If you feel your credit card debt is getting out of control, here are some tips to get you back on the right path:
Ask for help
Getting some independent advice regarding your debt situation can prevent many problems from arising. An independent observer may be able to see simple ways in which you can restructure your payments to make them more manageable. Free services such as the Consumer Credit Counselling Service are a useful place to start.
Consider a switch
While taking out a second credit card may not seem to like a great idea if you’re struggling with repayments on one card, but new users benefit from introductory offers that could help. A card with zero per cent interest on balance transfers and a lower APR could allow you to transfer your outstanding debt and pay less in interest on it each month. The only thing you have to do is remain disciplined in not running up new debts – cards with zero per cent balance transfer rates often charge more interest on new purchases.
Avoid hidden charges
Withdrawing cash using your credit card is a bad idea, as the rates charged on this are much higher than standard spending. Also, if you travel abroad, look carefully at your terms and conditions for charges that are applied when using your card overseas – it is likely that these will be higher.
Do more than the minimum
While merely meeting the minimum payment each month will at least prevent the debt from escalating into a major headache, you’ll never pay off the balance this way. Minimum payments are designed to make the debt last longer so it continues to accrue interest, so you must try and take a little more off the balance each month.
Look to a more secure future
Once you have your finances back on the road to recovery, you need to think about how you can prevent a crisis from happening again. Prepaid cards are a useful way to keep a closer watch on your spending. Available from lenders such as Secure Trust Bank, pre-paid cards require you to load money onto the card before you can use it, much like a pay-as-you-go mobile phone. This way, you can shop safely in the knowledge that the money in your current account will be untouched, and you will not accidentally spend money that is needed to cover outgoings.
There are also a number of innovative mobile apps that allow you to monitor all your financial commitments in one place, from anywhere. This should help to ensure you are always in control of your financial situation.