Credit card debt is easy to get into but can very difficult to resolve. There are various options available if you find that you are struggling to pay your cards.
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The best way to manage credit card payments
If your credit card balances are going up not down each month, its time to take action to prevent a more serious debt problem. First put them in order of interest rate charges. Knowing which is charging the highest percent and which the lowest is the first step to getting them under control.
Check to see if you can transfer the balances of high interest cards to a 0% deal. If you can swap to a card with no interest, the balance will be paid far more quickly. This option will only be available if your credit rating is good.
It you have multiple cards, the key is to focus on one at a time. Maintain the minimum payments on all the cards but identify the one which charges the highest interest. Focus on overpaying that one as much as you can each month. Once it is paid off start on the one with the next highest interest rate.
If you are trying to pay off your credit card debt it is important to stop using them. Take them out of your wallet or purse and cut them up (or put them in a draw).
Should you consolidate credit card debt?
Consolidating your credit card debt with a bank loan can be a good way of paying it off. The interest charged on the card will be far higher than that charged on a loan. You will therefore pay the debt off much faster.
Generally speaking you will also end up with a lower monthly payment. In this way consolidation can help if you were struggling to find enough cash each month to maintain all your payments.
However, and this is critical, you must make sure you can cover all your card debt with one loan. In addition the new payment must be affordable. If the payment is greater than the amount you can afford you could end up continuing to use your cards.
Consolidation will only be an option for you if you have a good credit rating. If it is already poor and you are missing payments you need to consider a debt management solution.
Use a debt management solution
There are three main situations where the strategies for paying off your credit card debt highlighted above won’t work:
– You can’t afford to pay any more than the minimum payments on all your cards each month.
– Your credit rating is poor so transferring balances to zero interest and getting a consolidation loan is not an option.
– You cannot get a large enough loan to pay all your card balances and / or you would be unable to pay the new loan payment without continuing to use the cards.
In these circumstances you should think seriously about whether it would be sensible to use a debt management solution. There are different options to chose from depending on your circumstances.
You may simply need a short term breathing space until your income improves or some money you have been waiting for comes in. If so a debt management plan might be sensible. An IVA or even bankruptcy might be better if the problem is more deep rooted. Speak to a debt expert for advice on which is best for you.
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