PLAY YOUR CARDS RIGHT
TRICIA PHILLIPS REVEALS 10 WAYS YOU CAN TAKE CONTROL OF YOUR CREDIT CARD DEBTS
MORE than three million people are trapped in a cycle of credit card debt, leaving them unable to pay back what they owe. They are being hammered with extortionate interest plus late charges and fees, meaning their monthly repayments do not make a dent in the outstanding balance.
Experts reckon it costs the average card user £2.50 in interest and charges for every £1 repaid, leaving some struggling year after year and unable to take control.
If you could be one of them, here are 10 things you must do now.
1 STOP SPENDING
IF YOU are only making the minimum repayment each month, your debt will not be reducing. These minimum amounts are just a token. You should aim to repay at least 10% of your balance.
If you carry on spending and building up more debt, you will never clear the balance.
Do not carry your card around with you. If it is not in your wallet or purse, you will not be tempted to buy things you cannot afford.
2 CUT UP YOUR CARD
IF YOU cannot stop the urge to spend then cut up the card, or at least hide it away somewhere you cannot access it easily.
3 KNOW WHERE YOU STAND 4 SORT OUT YOUR BUDGET
GO THROUGH your budget and work out if you can make savings anywhere by cutting back on nonessential spending or by switching to better deals for your household bills. Try making a note of everything you spend over a couple of weeks. You will be surprised by how those odd cups of coffee, magazines and that pint after work add up.
5 SEE IF YOU CAN PAY MORE
THE average credit card balance is £2,500 and the typical interest rate is 18.9%. If you pay just the minimum 3% off that balance each month, it will take 19 years to clear the debt – and you will be slapped with £2,493 in interest charges.
If you pay an extra £10 per month, you will be debt-free in eight years and pay £1,491 interest.
If you pay an extra £20 per month, you will be free of debt in five years and 10 months and pay £1,105 interest.
Stretch it to an extra £50 per month and you’ll be debt free in three years, one month and pay £630 interest.
6 SPEAK ABOUT DEBT TO YOUR FAMILY AND FRIENDS
DO NOT keep debt problems to yourself. It is difficult to admit you are struggling, but speak to your family and friends.
You never know, they may be able to help you out financially. Or, at the very least, they can offer support.
7 TRANSFER YOUR BALANCE
CONSIDER switching the debt to a 0% balance transfer card, where you pay a one-off fee and no interest
if you clear it within the introductory period. But be wary if you have missed repayments on bills and do not have a good credit record, as you are unlikely to be accepted for the best deals.
Each time you apply for credit it leaves a trace on your credit file, which will further damage your chances of getting access to credit.
You can do soft searches, which do not leave a trace on your file, to find out which products you are most likely to be eligible for.
Card firms offering this include Barclaycard and MBNA, while Moneysupermarket.com has a Smart Search and Totallymoney.com has an eligibility checker.
8 TAKE OUT A LOAN
IF YOU worry you will be tempted to spend and build more debt on a 0% card, or you have numerous debts, a personal loan may be a better option.
It will give you a structured route out of debt, with regular repayments and a time limit. Make sure you can afford the repayments easily before signing up.
Banks offering the best rates on a loan of around £2,500 are Ikano at 7.9% and peer to peer platform RateSetter, 9.2%.
9 THE MOST EXPENSIVE DEBT COMES FIRST
FOR numerous debts, make sure you focus on the one that is charging the highest interest rate first. Once you get that one sorted, it will free up more cash to clear any others much quicker.
10 GET SOME FREE, IMPARTIAL HELP
DO NOT struggle alone. If you cannot take control of your debt then get help immediately. It will only spiral out of control and the longer you leave it, the fewer options you’ll have to deal with it.
You can get free and independent help from your local Citizens Advice, StepChange Debt Charity on 0800 138 1111 or via stepchange.org, or the National Debtline on 0808 808 4000.