Few people would reject that using credit cards makes commonplace life more simple, reducing the need to have funds and making it easy to shop online and by phone.
All the same, paying with plastic can sometimes be too easy, since it doesn't always seem like you're actually parting with any cash. Consequently the lure is to spend without thinking about the implications too properly, until you hear the ominous thud of a amazing credit card bill striking the doormat.
If you've been caught out like this, the size of your card debt might appear overpowering, but don't panic - usually there are some simple steps you'll be able to go onto start off getting your debt back in order.
Try and make a little more than the bare minimum monthly payments:
The minimum payments required by credit card companies have slowly dropped over time. Where once it was typical to have to repay a minimum of 5% of your balance every month, it's now common to only have to pay 2.5% or 3%. With monthly payments this small in proportion to your debt, a major bite of each payment gets swallowed up in interest charges. Depending on the APR rate of your card, up to 75% of each payment could be 'lost' in this way, meaning that it takes a very long time for your balance to reduce to any great extent.
By aiming to repay more than the minimum, even if only by a little, you can speed this process up, and in the long term you'll end up paying much less in interest charges.
Put in priority your card debts:
For people with more than one card with different rates of interest, it is sensible to concentrate on the one with the highest interest charges. This means not just the one with the highest interest rate, but the one which actually charges you most each month, which could have a lower rate but a higher balance.
Check your statements to see which card is charging you most in interest monthly, and try to pay attention to paying off this card first by putting any extra cash you have into extra payments while keeping to the minimums on your other cards.
Change your card:
The credit card market is very competitive, and rates have fallen over the last three years. You could be bound to an old card charging an old rate that is much higher than newer cards. If you can get a new card with a lower rate and transfer your account balance on to it, you could save a lot in interest charges, helping you to bring down your debt. If you can get a card with an introductory rate on balance transfers then all the better - you will get a few months of interest free credit which you can use to really drive down your balance as 100% of each repayment will be helping to get rid of your debt.
Debt consolidation:
If finding a less expensive card isn't an option or isn't something you feel happy about, then maybe a consolidation loan would be worth taking into consideration. If you take out a loan and use this money to pay off all your card debts, you could benefit from a lower rate as loans are normally quite a bit cheaper than credit cards.
The side effects to these loans is that the repayment period might be quite long, and so even though your repayments will maybe be lower, you'll stay in debt for longer and so end up paying more in interest. Done carefully, however, consolidation can be a sound move if there's little chance of clearing your debt in any other way.
Watch your spending!
All the above strategies for getting your debt manageable will only work if you stop getting deeper into debt - and this means stopping spending on your cards. Ideally, you'd slice them up so that you can't use them again, but this might not be realistic as you may need to keep them as a credit option for unexpected expenses. In any event, lowering your spending to an absolute minimum will keeping your repayments as high as possible is the only sure strategy to clearing your debt in the long term.
Author Resource:
The author has been writing on financial topics for several years and is currently a contributor to Card Sense UK where visitors can compare credit cards .
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