Get­ting back into credit

Western Suburbs Weekly - - Business - Troy MacMil­lan on De­sign­ing Wealth Troy.MacMil­

Q: I don’t usu­ally look closely at my credit card state­ment, but when I checked my latest state­ment, the in­ter­est for the month was al­most $100. How can I cut down my credit card costs? Sarah - Ned­lands A: When peo­ple are strug­gling fi­nan­cially, keep­ing con­trol of credit cards can be ex­tremely dif­fi­cult.

The first thing to do is pay off your card, as most cards have an in­ter­est-free pe­riod as long as you stay up-to-date with pay­ments. This may seem im­pos­si­ble, but you re­ally need to bite the bullet and cut spend­ing to get it down.

Oth­er­wise, you may be able to con­sol­i­date it into a longer-term, lower in­ter­est loan you al­ready have, such as a mort­gage.

Take care to find out ex­actly what fees or penal­ties may be in­volved, both for your credit card and your mort­gage, as these may off­set the ben­e­fit com­pletely.

Once you have cleared your debt you need to do two things.

First, work out a bud­get that will al­low you to man­age your ex­penses in a re­al­is­tic way. Hope­fully you are able to main­tain the lifestyle you want but you may find you will need to cut out some un­nec­es­sary items to bal­ance the bud­get.

Se­condly, talk to your credit card provider and get them to re­duce your limit to an amount that you will be able to pay off with your monthly in­come mi­nus any ad­di­tional ex­penses such as rent, phone and elec­tric­ity.

They may make it dif­fi­cult to re­duce your limit – it is gen­er­ally harder than in­creas­ing your limit – but be per­sis­tent.

By mak­ing some dras­tic short-term changes to clear your debt and cre­at­ing a clear plan, you should find your fi­nan­cial sit­u­a­tion im­proves in the fu­ture.

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