How Do You Stop Mounting Credit Card Debt?
The latest credit card statistics are in, and they're alarming. Nearly one in four UK adults is carrying more credit card debt than they can handle. The rapid proliferation of credit cards has caused many in the government to feel that we are becoming a nation of debtors, about to sink under the weight of too many bits of plastic. The reports may be a bit alarmist - other reports indicate that most people do handle their credit wisely - but it never hurts to take a look at the way you use your credit cards. If your monthly accounts are eating up a larger and larger chunk of your salary, the following tips should help you get a handle on your credit card debt and stop it from spiralling out of control.
- Match your spending habits to the right credit cards.
Credit cards are designed with specific uses in mind - though the issuers do hope that you'll succumb to the temptation of convenience and use just one card for everything. Use a credit card with a low APR (or a 0% APR on new purchases) for long term purchases - those high ticket items that you'll take several months to pay off. For everyday purchases, use a credit card that offers rewards or cash back points. If you'll take more than six months to pay off a purchase, consider other means of financing it.
- Pay off your "everyday" credit card accounts in full each month.
If you can, pay off all of your accounts in full each month. Make a point of doing so with your 'everyday use' credit cards. It's tempting to overspend when you can just whack that dinner out onto your plastic, but that's a poor use of your money. If you won't be able to pay it off come accounts day, don't charge it.
- Make double the minimum payment on your 'long term' credit cards each month.
The rules are different for the purchases that you PLANNED to finance. Decide how much you can afford to pay off each month, and stick to your plan. Always pay at least double the minimum payment. That means that if a new purchase would make it impossible for you to pay double the minimum payment, don't do it. Paying ONLY the minimum payment is a recipe for staying in debt forever.
- Consider consolidating your debts with a balance transfer credit card.
If you're paying interest charges on several different credit cards, you're wasting hard-earned money. Choose the credit card with the lowest APR, and transfer your other balances to it, then concentrate your repayment efforts on that card. Take the time to check out balance transfer offers online at moneyeverything.com to see if you can apply for a credit card that offers 0% or very low APR on balance transfers.
- Retire store charge cards and high interest credit cards.
Get rid of your highest interest cards unless they offer you advantages you can't get anywhere else. Once you've paid them down or transferred their balances to lower interest cards, close the accounts and cut up or return the cards. There's no sense paying annual membership fees or taking the chance that someone else will fraudulently use the accounts that you're not using.