WARNING! You could get trapped in debt.
You could borrow as little as £1,000 on your card and repay more than this on interest alone. You would be paying over double your debt and trapped in these repayments for over 18 years.
Credit cards explained
Unlike any other loan, with a credit card you have the freedom to choose your own repayments. The one restriction in place is the minimum repayments; this is the lowest amount you are allowed to pay back each month.
However this is not a fixed amount, with most cards it is a percentage of what you owe. As your debt gets smaller so does the minimum repayment amount, this can lead you being trapped in debt for years. Think of it like a journey; the smaller the steps you take, the more steps you need to take and ultimately the longer you will take to get to your destination.
How to pay less
It’s simple: the quicker you repay your debt, the less you will have to pay. It doesn’t matter which way you look at credit card interest, repaying your debt quickly dramatically reduces the overall amount you will have to repay.
What’s best for me?
Repayments
A simple strategy to help you pay less and stop your self being trapped in debt for decades is to set up a fixed repayment plan, this just means you pay a fixed amount back each month that you can comfortably afford and this will avoid the minimum repayment trap.
Balance transfer
This allows you to move your debt from one card to another; this can reduce the amount you will have to repay if you move your debt to card with a lower interest.
Avoid charges
Charges can occur when you miss or make a late repayment, this can easily happen to anyone innocently enough who might just forget, To avoid this happening to you always set up direct debit to make your credit card repayment.
As we all know, our finances are seldom the same from month to month and you may not be able to manage a fixed repayment plan depending on your circumstances. The key thing to remember when dealing with credit card debt is always pay as much as you can each month and make sure you can afford this comfortably.
