If you’re in any kind of debt, it’s a fair bet that your credit cards are the biggest culprits. But first thing is first; credit cards can be a good thing when they’re used wisely. There are some great deals around like 0% interest for six months and even a ‘standard’ credit card can be a good option for those who use them sensibly. That’s because they provide free or cheap insurance on purchases, interest-free credit, and other rewards, plus legal purchase protection etc.
Credit cards also allow you to make big purchases with relative ease. And all this is great news for those people who aren’t in debt and who use them well. But for those of us struggling to make ends meet and trying to pay off our debts, credit cards can be like drugs; it’s all too easy to spend on them and push the debt and associated interest payments to the back of your mind.
And if you’re one of the majority of people who find it too easy to let credit card debt slide out of control, then please be clear; credit card debt is one for the most expensive forms of debt around. And to compound matters (literally…) what many people do is to meet the minimum monthly repayment only, so the total amount owed goes up and up.
The reality is that if you can afford to pay just a little bit extra off your card each month (or better yet the entire amount) you can take many years off your repayment period.
So pay off as much as you can possibly afford; it will be money well spent. And if you can manage without the credit cards in the meantime, then cut them up and throw them in the trash can.
A good option is to try and organize a balance transfer to a 0% or lower-rate credit card. But even then – always increase your monthly repayment to as much as you can comfortably afford.
You may even find it cheaper to get an alternative form of loan to help clear the credit cards and pay the interest on the new loan. If you look at the cash loans from Wonga for example, they’ll be very clear and transparent about exactly how much interest you’ll need to pay and by when. And you may find this a cheaper alternative.
Peddling drugs is illegal – but peddling credit cards to people who are too easily tempted isn’t so you have to take matters into your own hands.
I love your last line. Having credit cards requires us to be disciplined. Which can be easier said than done at times, especially when it comes to spending.
I’ve always wondered why people don’t take more advantage of transferring balances to a lower interest credit card if they are in CC debt. I know some people that play the transfer game to perfection and save a ton on interest. The wife and I made an agreement that if we ever carried a balance that we would cut the credit cards up.
The problem is that they usually charge upwards of 3% to transfer the money from one card to another. While this is still better than 20% interest on a card, it is still adding to debt. A few years ago there used to be 0% cash advance, 0% transfer fee and 0% interest cards. People would use those and put the rest in a high yield savings account and get free money!
Credit cards require discipline, and this is coming from someone who was quite irresponsible over the years. I guess you can say I’m a recovering credit card spender 🙂
If you can get a 0% interest card it’s a great option, but that’s not always a viable solution. If you are already in debt, depending on how much or how bad you have wrecked your credit already, it may be impossible to get anyone to give you another line. Even if you can’t, I would imagine that going with any kind of loan operation wouldn’t benefit you since they charge ridiculous amounts of interest and fees which make the credit card interest seem very appealing.
impulse (over)spending releases the feel-good endorphins. Paying down debt… not so much.
So for some it’s just as bad as any other drug-addiction.
But the banks and finance companies are the dealers.
I love my cards… but I always pay them off and reap the rewards. Cash back savings to the tune of $400-$600 per year. And yes, I put EVERYTHING I can on that card.
It’s crazy when you read the tiny little print on a Credit Card statement that says “this $3000 bill will take you 14 years to pay if you only pay the minimum” and it’s true. Most people don’t read the fine print but that’s why they make it so small so you don’t read it. We pretty much use credit cards for everything to get rewards and the ease of not having to carry cash or get cash. We pay it off each month though but by having a budget we already know what we can and cannot afford and if it’s not in the budget it’s not going on the card. Great Post. Mr.CBB
having credits cards is what keeps me in the hole even after I dug myself out!
Good call! If you’re in any type of credit card debt, you should immediately cancel all your cards. The temptation will be too much, but that being said, once you’ve paid it off and learned your lessons, cc’s can be a great tool and even make you a few bucks 🙂
I do have to point out that if you DO use credit cards, then at least get one that gives money back at the end of the year. XD