CHRISTMAS DEBT HANGOVER
WE may have long said goodbye to dear old Santa, but for many of us there is still a lingering and unavoidable reminder of last Christmas – ongoing credit card debt.
If you’ve found you flashed the plastic a little too much over the holidays, here are some simple tips to get your bank balance back into the black sooner rather than later.
Rule 1: Stop using your card/s
PUMP the brakes. If you’re already struggling due to excess debt, why keep adding to the problem? Paying for purchases in cash makes you stop and think: “Do I really need that item”. There’ll always be instances where you’ll need a credit card purchase (groceries/an unexpected bill) to get you through until the next pay day, but not changing your spending habits is a sure-fire recipe for disaster.
Rule 2: Pay off the highest rate card first
THIS is a no-brainer. Make sure you put any extra money available into reducing the debt on your highest interest rate card every month (but don’t forget to pay the minimum on your other cards as well). Once you’ve cleared that debt, continue doing this on your next card and the next until you can say goodbye to them all.
Rule 3: The B word
YES, we know it’s boring, but sitting down and establishing a realistic budget will give you a great insight into where you can save money. One less coffee a week or one less takeaway meal can suddenly give you that extra cash to redirect to your credit card. And, as you develop good spending habits, you will be less likely to fall back into your “old” lifestyle.
Rule 4: Make extra payments
IF YOU can manage to make two payments each month it will drastically cut the time you pay off your debt. By lowering the average daily balance, you interest charges will drop as well, meaning you’ll be debt-free in no time.
Rule 5: Lower that rate
IF YOU don’t ask, you don’t get. Contact your credit card provider and request a lower rate. In a competitive market, you might just be surprised with their answer. A lower rate ensures lower repayments which, in turn, will allow you to wipe out more of the principal.
Rule 6: Consolidate Your Debt
IF THE amount you owe on your cards seems too overwhelming, maybe consolidating your debt is the answer. By taking out a loan (from a reputable lender or banking institution) you can pay off all your credit cards at once and then pay one manageable loan repayment per month – ideally, at a dramatically smaller interest rate than your cards.