We live in a ‘want it now’ society. Credit cards are easy to come by and leading up to Christmas, when the pressure is on to buy gifts, give our children a memorable Christmas and have happy holidays, it is often difficult to resist the appeal of instant credit.
By December 2015, total credit card debt for the UK was £63.35 billion. Per household this is £2,346 and for a credit card bearing average interest, it would take a whopping 25 years and 5 months to repay (yes you read that right!) if you only made the minimum repayment each month. The minimum repayment in the first month would be £56 but reduces each month. If you paid £56 every month, the debt would be cleared in around 5 years and 5 months. These statistics are taken from the Money Charity Statistics
Based on the above information there are two clear ways to clear your credit card debt, without spending a lifetime doing it! Firstly, you could consolidate the debt, so you pay a fixed sum each month for a fixed term and perhaps get a lower rate of interest or secondly, you choose to pay a higher sum each month to clear the credit card.
Credit cards have many benefits. They can be used monthly to pay for fuel, groceries and give peace of mind when buying online purchases. Credit cards come with incentives to spend, such as cashback reward schemes, air miles and loyalty points. Having a credit card builds credit and shows a history of repayments, contributing to increasing your credit score. However, unless you have the means to manage the credit card each month, many people will pay and clear the bill for example, credit cards become a long-standing debt that is easily added to and very difficult to clear. Although ideal for necessities such as renting a car, replacing a household appliance or car breakdown, using a credit card as income, is living beyond your means and you will find yourself struggling to make the repayments necessary to clear the debt.
The first step is to realise that you can stop now and deal with your credit card debt. Denial is only going to lead to more debt, so be honest with yourself about your current situation and make a commitment to clearing the debt. If you have one or more cards that you are struggling to clear, cut the credit cards up. Although this seems quite drastic, you have to recognise that the only way to clear the debt is to firstly stop adding to it. The interest will increase the debt alone without further spending each time a little more credit becomes available to you.
Seek advice as to the best way to clear the debt. As outlined above it may be that you are able to consolidate into a more manageable loan that means you fix an affordable amount you can pay each month and for a set period of time until the debt is cleared. If you are unable to consolidate the debt but struggling to make the repayments, seek advice. Don’t bury your head in the sand and hope that the situation will resolve itself. It won’t. The Money Advice Centre or your local Citizens Advice Centre can help in this regard.
If we want different results we have to do something differently. That means changing our spending habits, living within our means and managing our money better.