Credit card debt is something many people get into trouble with fairly early in life. You get your first student credit card and end up buying “stuff” merely because you the card.
The next thing you know, the card is maxed out and you can only afford to pay the minimum, leaving the principle virtually untouched. In fact, if the balance is large enough, the minimum payment may not even cover the interest rate and you end up going over the limit.
Years later you still have that card and graduate from school, get your first job and what do you know, you get another pre-approved card in the mail with a lower interest rate. You figure you can transfer your balance and pay it off quicker.
The only problem is that instead of leaving the first card in the drawer, you take it out and buy yourself something nice for the first time in ages.
Before you know, both cards are maxed
If you are lucky, the cycle stops here, but that is rarely the case. Another application shows up in the mail and the whole process starts all over again.
This is a common tale and one that debt management companies here over and over again. It could be due to excess spending or due to loss of employment. Regardless of how you got here, you are now stuck with multiple credit cards and have no idea how to get out from under this umbrella of debt.
Unless you are going to file for a DRO or an IVA, you are going to have to tighten up the purse strings and figure a way to a pay these cards off more effectively.
Here are a few tips that can help you get your debt back under control and paid off:
- Re-establish Your Budget – sit down and write down every pound that is spent. Then go over that list and figure out what is necessary and what is luxury. Even if you are canceling your Friday night out at the pub for a few months, it will make a difference.
- Establish Your Card Priorities – get all of your cards together and write down the balances and the interest rates being paid. You will rank them in order from the lowest balance to the highest. If cards have similar balances, the card with the higher interest rate will rank higher.
- Establish Your Payment Budget – add up all of the minimum payments and then add at least £50 to that figure. This is the amount that you need to work into your budget. If you can spare more or find some extra money during the course of the month, earmark it for your credit cards.
- Start Making Payments – Now that your budget is ready to go, start paying off the lowest balanced card first with a minimum payment going to the rest of the cards. Once that card is paid off, fold that payment into the next card on your list. Now, instead of paying the minimum, you are paying down the balance with the extra money. When that card is paid off, fold that amount into the next card.
It can be frustrating at first and takes a lot of discipline, but after a few months, you will really start to see the progress. Gradually, your interest payments are going down and more of your money is going against the principle. You will really see this take effect once you are into your third or fourth credit card.
Now, all you need to do is avoid the temptation of taking it easy on the payments one month or in using one of the paid off cards. You may even be best served to start cancelling cards as they are paid off.
This way, the temptation to spend is completely removed. When you get to the last two cards, hold onto them for emergencies, but for once, leave them in the drawer at home when you go out!
