Tame your Credit Card

 

credit_cardHighly convenient, but very costly

Credit cards are probably the most expensive form of debt there is. Yet we’re addicted to them. That addiction costs us thousands in interest and untold stress as balances build up, month after month, we never seem to be able to pay them off. It’s just too easy to spend money using cards and spiral into debt as a result.

Getting out of credit card debt

  • Step one: stop using the card! Cut it up, give it to someone else to mind or put it someplace where you can’t easily get to it – frozen in the freezer works for some people!
  • Never use your card to borrow for holidays or immediate needs – use a short-term (less than one year) loan instead
  • If you have savings, use them to pay down your balance and build back up your savings by setting up a standing order for amount you’ve saved in monthly credit card repayments
  • If you have multiple cards, look carefully at the interest rate on each card, and the interest rate for balance transfers – would you pay less in interest if you consolidated the balance onto a single card and paid that down over time?
  • If you can’t pay the card off all at once, use the debt snowball method – pay a little each month into the account with the lowest balance. When that card is paid off, cut-it up, then move onto the next card and pay that one off.
  • If you have access to a short-term bank or a credit union loan and you can afford the repayments, take out the loan and pay off the card (the interest rate should be significantly cheaper). If you do this, you must cut up the card so you won’t be tempted to build up more debt

“But I need a card so I can book flights & use the Internet”

  • Check to see if a Prepaid Money Card is suitable for your needs, there is a growing number available in Ireland from providers including O2, Moneybookers, Swirl, Payzone & Neteller
  • Open a current account with a VISA debit card (eg Ulster Bank) – this pays directly from your current account so it’s more like using cash or a cheque
  • If you are going to keep a card, get as small a credit limit as you can and set your monthly repayment to pay off the entire balance each month. With a higher limit, it’s just too easy to spend more. You can always get the limit raised for a one-off payment if you need to.