Millions of people manage their daily finances using their credit cards. It is far too easy to keep spending when the credit is readily available. The only problem is that it isn’t your money. The more you spend the more trouble you may put yourself in.
The amount of credit card debt across the country is at an all-time high of over £60 billion and this is a debt that is proving difficult to shift as the majority of people are only paying back the minimum amount each month. In November 2016 alone, this debt increased by over £570 million.
Credit cards can be a handy way to borrow money if you use them in the right way, but getting it wrong can leave you in real trouble. This can lead to repossession of your car, house and any personal items of any value that can be sold to recoup some money that you owe. If you own no assets that can be repossessed then that could lead to bankruptcy.
Sensible use of credit cards can sometimes be beneficial. They could be used to help cash flow as you come towards the end of the month and pay day. Paying off the balance before the statement date would mean no interest being applied and therefore keeping that debt under control.
Where the balance is not paid off, interest will generally be applied unless you have an interest free period, for example where there is a promotion by the credit card company or it is a new customer offer.
Where interest is applied, this adds to the amount outstanding. Further spending can take place the following month, increasing the balance and making it more difficult to settle the debt. Again interest is applied increasing the debt further. For many this can be a never ending cycle and they eventually come to the point where they cannot afford to make even the minimum payment.
At this stage it is sensible to seek professional advice to try to bring these debts under control.
How To Pay Off Credit Card Debt
There is a possible solution with the balance transfer option. This is where you apply for a credit card with a different company and transfer the balance accumulated on the old account to the new one. Credit card companies have offers for new customers whereby the balance can be transferred for an interest free period. This interest free period can be anything from 6 months to two years or more. There is generally a fee charged by the credit card company which can be around 3% of the total amount transferred. This fee could be higher or lower so please check with the card company before agreeing to a balance transfer. There are some balance transfer offers available with no fee so it pays to shop around and do your research.
When you make a transfer such as this you must always pay the minimum monthly amount. Defaulting can result in the offer being withdrawn and charges and interest then being applied to the debt.
It is advisable to pay off more than the minimum monthly amount which will help pay the debt off quicker and hopefully before the interest free period expires.
It is important that you know when the interest free period ends as most credit card companies would not inform you and just apply interest to the outstanding balance. Once it does come to an end, in the event there is still a large balance, you may then have the option of another transfer for a further interest free period.
One of the problems that exist with these transfers is that it frees up credit on the card where the debt has been transferred from.
When you have debt problems it is important you are controlled are restrained when it comes to further credit. Following a balance transfer, cut up the old card or cancel the account completely so temptation to spend is reduced. Will power is very important.
There is great temptation then to spend further on that card increasing your debt further and being forced to pay interest.
There comes a time where this card is up to its credit limit and payments become unmanageable. Payments at this time will be made to two separate cards, one interest free and the other which is not.
Again the option to do a balance transfer may be available. However, you would then have 2 credit cards which require two monthly payments. You can see from this it is a very dangerous route to take.
If you are at the stage where you have a number of credit cards and other debts and can’t make the contractual or minimum payments required, you must seek professional debt advice.
Credit Card Debt Help
Whilst there are a number of options available to ease your problems including Consolidation Loan
or Debt Management
, where you fail to make relevant payment, there is the risk of companies seeking your bankruptcy or taking steps to take possession of any assets you may own such as your home.
There is another option you may have considered in an IVA
which can protect your home from repossession and you from bankruptcy and make your debts more manageable by paying a single affordable monthly payment.
If you are affected by debt and struggling to meet your monthly obligations, here at X-Debt, we can help ease your worries with an IVA.
An IVA will generally run over a time period of 5 years and at this time any outstanding debt will be legally written off. An IVA
will also take into account essentials such as mortgage or rent, food, household bills, allowances for motor expenses etc.
Get in touch now by calling 0800 043 2424 or 0161 787 3400 or Contacting Us Here
You may wish to contact the Money Advice Service
or the Financial Conduct Authority
for independent debt advice.