Paying minimum amount on credit cards can mean maximum long-term woes
IT WILL soon be time to start planning summer holidays and research suggests tens of thousands of Scots will load even more debt on to already straining credit cards.
If you are one of them, then now might be a good time to have a look at your credit card balances and make sure you are doing all you can to repay the debt as quickly as possible.
It’s all too easy to get into the habit of making minimum payments to credit cards every month and budgeting for that payment rather than actually working out how you are going to repay the whole balance over a manageable period.
Over the last few years, some credit card companies have reduced the minimum payment that people need to make every month.
This is just making things even worse since all it means is that it will take you longer to clear the balance.
It will also cost you more – often thousands of pounds more – in interest charges if you make smaller payments.
You should make sure that the card you are using charges a competitive rate of interest and if you are paying too much, you should consider transferring your balance to a card with a lower rate of interest.
It might be possible to move to a card with zero per cent interest for the first year or two.
But look out for any upfront costs, which are usually a percentage of the balance you transfer.
It is possible to wipe out any benefit of no interest charges with a large up-front fee.
Once you have transferred, then you need to change your habits.
Don’t settle back into a minimum payment routine.
Look at your budget and decide how much you can afford to pay every month and how long it will then take you to clear your balance. And stick to it. If you find you are struggling to make payments regularly, then take advice early.
And make sure that you take it from someone who won’t pile on more financial woes by charging for their time.