Moving the Mountain: Credit Card Debt Management
Credit card debt management has become a concern for many families in the UK, as consumers reached freely for ‘the plastic’ in their struggle to make ends meet during the recession of 2007-2009, and must now struggle again to repay the debt.
In a survey by PriceWaterhouseCoopers in 2009, only 32% of people were confident they could make repayments on all the outstanding credit they had, compared with 56% the previous year.
In 2009, the average total debt of all households in the UK was £60,000, which included £10,000 in credit card debt and other unsecured debt.
Need credit card management advice? Make an online financial advice enquiry, or ring us now on 0800 678 5929
Assuming that you are still able to make repayments on your credit card debt, there are various ways to maximise the efficiency of your credit card debt management and keep interest as low as possible.
Credit card debt management using balance transfer cards
One popular way to manage credit card debt is to switch your existing credit card debt to a 0% balance transfer credit card. By removing credit card debt interest from the equation, this ensures that 100% of what you pay to manage credit card debt will reduce your owings, enabling you to pay off your credit card debt more quickly.
When considering which 0% card to use for your credit card debt management, it is important to know who is managing the card, however. If your existing credit card debt is with MBNA, for example, and your plan is to obtain a Virgin credit card to transfer your credit card debt, you will find that this is not allowed, as MBNA is behind the Virgin card as well, and will not allow you to make the transfer and avoid payment of your existing MBNA credit card debt.
Another point to note in relation to your credit card debt management are minimum monthly payments. These are often set at very low levels that sometimes may cover only the interest due, so that you might effectively have the credit card debt forever.
Credit card debt management by ‘snowballing’
Another way to manage credit card debt is ‘snowballing’. This involves recognising that various parts of your credit card debt have higher interest rates, and are thus more expensive, than others. First, set up standing orders on your credit card debt, if you possibly can afford this, and then focus on using any extra cash you can raise on reducing your most expensive debt first, leaving any interest-free credit card debt until last.
Other tips for credit card debt management include:
Don’t use a credit card to withdraw cash, as an instant fee and a high rate of interest often applies.
Don’t use credit card cheques, as they are treated like cash withdrawals and will inflate your credit card debt.
Keep an eye on your credit card debt limit – if you exceed it you will pay a penalty charge, typically £12.
Make timely payments as part of your credit card debt management – again, late payments typically cost you £12.
Credit Card Debt Management in crisis
Credit card debt management while making repayments focuses mainly on minimising interest. However, for those who are unable to keep up payments, there are a number of strategies that can assist with emergency debt management (see ‘debt management’ page on this website).
Would you like to hear more about credit card debt management, or other forms of debt management? Make an online financial advice enquiry, or ring us now on 0800 678 5929
