Do you have control over your credit card debt, or does the credit card debt have control over you?
Over the past 30 years we’ve all grown accustomed to the flexibility that credit cards provide. The ability to pay electronically for something instead of carrying lots of cash around is an attractive thing.
However, many people run into problems using credit cards and end up overspending on things they don’t need and struggling to repay the balances that they owe.
And if you get close to going over your credit limit? No problems – the banks will happily offer you an increase in the limit so you can continue spending money you don’t have.
Don’t get me wrong – credit cards are fine if they’re used well. But when they’re not used well, they can cause a lot of financial damage.
So, if you have credit card debt and you’re not making any progress, here are some ideas.
- Stop using the card. I know it sounds basic, but don’t use it any more. Pay cash for everything. Don’t add another cent to your credit card debt, even if you’re planning to pay it off straight away.
- Shop around for a better deal. These days the banks are clamouring for your attention. Most financial institutions are offering interest-free periods when they refinance existing credit card debt. If you owe $20,000 on a credit card at a 20% interest rate, you’re paying around $4,000 a year in interest. That’s a lot of money. Refinance and get 12 months interest free and save yourself $4,000.
- Keep looking. Once the interest free period is over, most people stay with the credit card provider and start paying interest if there’s still debt left over. Don’t be like them! Re-finance again and find another interest free deal.
- Spend less. I know it’s not fun, but this is what got you in trouble in the first place – you spent money you didn’t have. So now, not only do you have to stop spending money that you don’t have, you also have to start using part of your income to repay the debt. So spend less. The party is over.
- Pay more off the credit card. You know on your credit card statement it has a minimum payment amount? Don’t ever just pay that. If you do, you’ll be on an old age pension and still trying to get rid of the debt. So pay as much off the card as possible, but be sensible. Don’t pay too much off it and then draw it back out – that’ll be a cash advance and you’ll pay interest on that money.
- Set a goal and stick to it. If you had a $20,000 debt and transferred to an interest-free deal each year, you could pay $10,000 a year and knock that debt off over two years. Too hard? Then try $5,000 a year for four years. Set a goal and write it down.
Debt can be good or bad, depending on how you manage it. Don’t be a credit card wimp – take control and show your card who the boss is.