A credit card is a mystical, majestical thing that allow you to enjoy nice dinners, cheeky splurges and loads of fun stuff. Well... at least until the bill arrives.
Suddenly that generous 'YOLO!' round of shots, 'must have' date dress and trip to see your best mate don't seem like the best idea after all because by your calculations, you'll still be paying it off installments when your grandchildren start college. The moral of the story is that those who are terrible with money should maybe avoid temptation and credit altogether but if you can't face giving up that Visa, then follow these steps to keep 'the fear' to a minimum.
1) Face reality
There's no point in ignoring the bills and pretending that you're as flush as Donald Trump, that balance ain't going to disappear by itself. Sit down and add up any debt you have on credit cards or overdrafts and if it's a sizeable sum, then maybe getting a loan from your bank or credit union would be a more savvy option than paying high rates of interest. Some banks offer interest-free periods on their cards so changing providers can help you to minimise your payments, check out this
calculator to see what the best move is for you.
The National Consumer Agency has some additional information on switching your account
here.
2) Make a plan
Next, you need to decide what you can realistically afford to pay off each month. If you just make the minimum payment, you'll never get on top of the bill and while there is always a temptation to pay off a big chunk once you get your wages, chances are that you'll run out by money and fall back on your flexible friend yet again. Slow and steady is the key here.
In the meantime, give the card to a sensible sibling or friend to avoid piling more debt on to your account in a moment of weakness. It is also a good step to reduce your credit limit to a smaller, more manageable amount to prevent the same situation arising again.
If you can't seem to figure out how to handle your mounting debt, try contacting the
Money Advice And Budgeting Service (MABS) who can help with this process. Their website also has some great information on getting those day-to-day expenses under control.
3) Stick to the plan
Once you've arrived at a suitable amount, make sure to keep it up every month. Regardless of what else may be going on in your life, missing payments is just going to cause additional fees and put you a little deeper into your financial hole. Most credit card accounts can be accessed online so make a transfer as soon as those wages hit your account. Once it's gone, you'll manage without it. Late payments can also have an impact on your credit history and could cause problems when applying for loans or a mortgage in the future.
If you absolutely must use your credit card, stick to making purchases rather than withdrawing cash. Each cash withdrawal from an ATM incurs a hefty fee and you could also be paying a much higher rate of interest on these transactions.
4) Enjoy the freedom
Finally paying off that big bill and seeing a shiny '0.00' as your new balance is one of the best feelings ever. However, it's easy to fall back into the trap so reduce that credit limit and only use your card for emergencies or once-off purchases. Pay your bill in full every month and finally, give yourself a clap on the back for being such a Sensible Susan!
