How to deal with your credit card debt
Credit card debt is not as uncommon as you think – thousands of people in the UK are in some form of credit card debt. But not everyone knows how to deal with it. Here’s our quick guide on how to deal with your credit card debt:
How did I get into debt?
Credit cards are usually our friends when we see something we want but don’t have the cash to pay for it. People usually get into credit card debt when they use credit cards to purchase food, clothing and other basic necessities. This usually means that there is not enough monthly income coming in and they are relying on their credit cards to purchase their necessities. This can affect a person’s credit score if they do not keep up with the payments. It is also not enough to pay the minimum balance – as this has little to no effect on chipping away your debt and improving your credit score
What to do next?
When a person realises that they have a financial problem, they can move onto paying off their credit cards. If they have problems with paying off the balances, then they can speak with the credit card company. People should not be afraid to call them, because just as bad as you want to pay them off, they want their money back. They can help you lower your interest rate, move your balance to another card, drop late fees and make other settlements if you agree to pay a certain amount each month. They can and will probably work with you to make a deal to pay off your debt.
Which card should I pay off first?
When it comes to credit cards, it is most likely that you have more than one that has caused the majority of your overall debt. You have two choices. The first one requires that you pay off the cards with the highest interest to get rid of them quicker. When you are done with the high interest ones, then you can work on increasing your payments on the other ones. This will help you save interest in the future.
The second option requires that you pay off the cards with the smaller balances to finish them sooner. This could raise your credit score. When you pay off the cards with smaller balances, you will feel much better that you have paid off a few cards and some debt.
Debt consolidation is another way to go. Speaking with a professional can help you organise your debt and get you on the right track to paying it off and raising your credit score. Some debt consolidation companies are fraudulent, so it is important to speak with someone trustworthy and reliable. This option is not for everyone, but it is available if you need it.
Notes for the future
When it comes to credit cards, there are a few things that people should keep in mind.
Pay more than the minimum balance: The minimum balance will only cover the interest for that month and a few pounds. If it is possible, pay off the whole balance when you get the bill. That way you will start off with a clean slate each month.
Use credit cards only for emergencies: This teaches you how to self-manage your money and it will make it easier to pay off your debts.
Prioritise your credit card debt: Pay off credit cards with high interest rates and keep only one or two with the lower interest rates. Cut up all the old ones and cancel them so that you won’t keep using them.
Don’t be scared to ask for help: Take advantage of credit card counseling if you have problems you cannot fix by yourself. Don’t forget, some of these services may cost money, so if you can budget and fix your financial problems yourself, then you will be better off.