Plastic fantastic – Flexible ways to reduce your credit card bill faster
Credit cards. Our plastic friends that are great at getting us out of a tight squeeze when we need them; like helping fill the car with petrol when cash is tight or picking up the weekly shopping if the pay transfer hasn’t hit the account yet! But these good mates can turn into nuisances when the amount owing has grown and you find yourself struggling to keep up with the minimum payments let alone trying to knock down the overwhelming balance.
So, when the bill has ballooned and you find yourself staring credit card debt in the face, what’s the best way to start paying off that balance? Follow these tips and you’ll see that figure falling before you know it.
Stop using the card
Yes, we know it sounds obvious. But the very best way to stop your credit card debt getting bigger is to stop using your card altogether. Then carry on making monthly payments – as much as you can comfortably afford – and the balance will fall every month. The best way to stop using your card altogether? Cut the excuses and reach for the scissors. It will hurt your credit card company more than it will hurt you.
Never miss a repayment
Late payments can incur fees that will just add to your balance. Everyone’s forgotten to keep up to date with payments at some point or other, and it won’t just mean extra charges; but could also mean a black mark on your credit record.
Max up from the minimum
Making the minimum monthly payment is a lot like fighting a losing battle. The minimum payment is usually set just a little higher than the interest rate, which means you’ll just be treading water. Start making headway towards the shore and swim your way out of debt by paying more than the minimum and you’ll soon begin to move towards safety. For example, if you pay $50 each month off a debt of $1,000 at an interest rate of 17%, it will take two years to repay the balance. But if you increase your repayments to $100 per month, you could clear your balance in 11 months (13 months earlier).
The power of reduction
Ask your credit card provider if they can somehow lower your rate. They may have a number of different credit card products with different rates so give it a go…it doesn’t cost anything and you’ll be surprised at what they can do. Remember, they’d rather you pay them something than nothing at all.
Switch to 0%
Another obvious one! Keep your eyes open for 0% balance transfer offers and look forward to knowing that every cent you pay will reduce your debt, not just clearing the interest like before. You may be charged a percentage of your balance to switch…but that could be cash worth paying to reduce that rate to zero for a set period of time.
Slash the cash
The clue’s in the name. It’s a credit card, not a cash card. Though it may be tempting to withdraw a few dollars when you need them, by using you credit card you will be charged a cash withdrawal fee and the interest charged on your withdrawal may well be higher. Be warned! Don’t ever use it to withdraw cash!
Author Bio: Rachel Maher is a financial content writer from Western Australia, she writes for Fairgo Finance, giving the average Aussie the best tips about savings and managing their money.