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Managing Your Credit Card
Posted October 26th, 2009
Are you managing your credit card, or is it managing you? Does your monthly statement dictate how you feel for the rest of the month because the figures on it are so ghastly? If so, you need to take back some control. Let’s face it, you are the one who is always calling the shots with your credit card. It doesn’t jump out of your pocket and into the merchant’s card reader of its own accord.
Here are a few ideas to help you manage your credit card more tightly. They are not complicated, but they do require some effort and a sincere desire to put things right.
- You must pay your balance down as quickly as possible. The minimum payment is just that: the smallest amount you can pay without being considered in default. If you have a $2,000 debt at just shy of 20% interest p.a. and you only pay the minimum amount each month of 2% of your debt, it will take you over forty years to pay it back, and you will have paid over $5,000 in interest. However, pay an additional $50 on top of that minimum amount each month, and your debt will last for three years and you will have paid just $500 in interest.
- Consolidating your credit card debts is a good idea, but it depends how you go about it. Taking a credit card balance transfer offer of zero to 3% over six to eighteen months, or a little higher for a longer period, is the right way to do things. It may mean you are faced with a deadline and the pressure to pay off your debt, but that may be just what you need to get organised. The other type of debt consolidation is a long-term loan, or rolling your debts up into your mortgage, but this is not a great idea. Remember the sums in the above paragraph. Think how many thousands of dollars you are wasting by paying your debts back over such a long period.
- Having said that, introductory offers should also be approached with caution. You need to know that the period you are looking at is long enough to accommodate your repayment budget. Jumping at a 0% rate, failing to pay off your debt before the period expires, then being clobbered by a high regular rate of interest is a disaster. Especially as your credit rating may not allow for a second balance transfer to another 0% offer – if one still exists. The plethora of 0% offers at the moment is a sign of the economic crisis in general, and the credit card industry struggling to maintain its growth. When times picks up, there may be less need to lure customers, and those 0% deals may be a little thin on the ground.
Related posts:
- Managing Your Commonwealth Bank Credit Card
- Managing Your Credit Card During A Recession
- Managing Your Aussie Credit Card Account
- Managing Credit Through Personal Events
- Guide to Budgeting: Saving Money And Managing Your Expenses
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