Credit Card Debt

If you’ve been depending on your credit cards a lot recently, or if you’ve just been enjoying the buy now, pay later feeling of convenience that credit cards offer, it may be time to cut up the plastic and pay the piper.  Despite the convenience of credit cards, this type of debt can quickly get out of control and encourage over-spending.  If you’re feeling the pressure of growing debt, then right now is a great time to hatch a plan to break free from it. 

Here are a few top tips to help you discover financial freedom:

• Consolidate all your credit card debt onto one 0% card by doing a balance transfer. You’ll pay a balance transfer fee but likely it will be less than the interest you would have paid on the other card.  Once all balances are moved to one card, aim to pay off the debt before the end of the 0% interest-free period.

• Try to pay more than the required minimum payment due.  Paying more than the minimum payment will reduce your balance, and eventually you will be able to pay off the entire balance.  If you just pay the minimum payment, you’ll be paying off your credit card for years to come.

• A follow-up on the last pointer, if you can't pay more than the minimum payment, at least make the minimum payment.  Going 30+ days past due on a credit card bill will put long lasting negative marks on your credit history.

• For future credit card spending, only charge a purchase to your credit card which you can pay for in full by the end of the month.  Enjoy the convenience of not having to pay for your purchases on the spot, but there is no reason to pay interest on an item that you found at a great price.

• It doesn’t make sense to sock money away in a savings account when you are paying interest on a credit card.  Instead of saving, pay off your credit card debt and only begin saving once you are out of debt.

• Use Wonga’s free budget calculator to create a budget and manage your finances!

Hot Tip

• Credit card companies are becoming increasingly competitive with one another and therefore offering all sorts of promotions to new customers.  If you are planning on making a big purchase, find a credit card that offers an interest-free period on new purchases and budget to pay off the purchase amount within the interest-free period.  It’s important to not go beyond this interest-free period as it’s likely that all interest will be added on to any remaining balance.