This is a special guest post by John from MoneyNerd. Enjoy!
Credit cards are an increasinglycommon way for people to pay for their daily goods and services. But tomany people, they are more than an alternative to debit and cash they areessential tools when it comes to managing their budget.
Some people simply won’t be able to manage their bills and essentialswithout a credit card. But of course, you simply can’t leave credit card debtsto mount up, can you? But clearing credit debt is notoriously difficult and notmade any easier by the mistakes people make.
Let’s look at 5 common mistakes people make when trying toclear credit card debt. That way you can be sure to avoid them and increaseyour chances of successfully clearing any outstanding debt you have.
Getting a loan
It’s surprising how many people recommend getting a loan toclear credit card debt. Advice websites and financial advisers will oftenadvise people that getting a loan can help and while it might rid you of yourcredit card debt it will leave you with loan repayments to deal with.
You aren’t really solving the problem, are you? You’resimply trading one debt for another, in extreme circ*mstances getting a loanmight be advisable but it should not be your first port of call because it willoften just make your financial situation worse.
Not going above the minimum payments
If you never go above the minimum payment it could takeyears to pay back any outstanding credit card debt especially when you considerthe mounting interest costs. The minimum payment is usually small around 2 – 3%and if you are struggling to manage other costs it’s understandable whysticking to the minimum payment might be easier.
But by doing this all the time you will be increasing theamount of interest you need to pay and making it much more difficult to clearthe debt. So, try to go above the minimum payment whenever you can, if youmanage to clear the entire bill each month you can avoid any extra interestcosts as well.
Not setting a budget
A budget is something everyone should have but when it comesto clearing credit card debt a budget is essential. When setting up your budgetwork out what your monthly income is and your average outgoing expenses. Usewhatever you have left to put towards paying off your debts faster, you caneven use this time to work out ways to make extra savings like reducing yourshopping expenses for example.
Not taking advantage of a balance transfer
The main issue with credit card debt is the mountinginterest, in a short time this extra cost can turn a small debt into a huge oneand it can mount up very quickly. To avoid this you should take advantage of abalance transfer.
With a balance transfer, you can move your outstandingcredit card debt to a new credit card withzero percent interest. Taking out another credit card might seem like abad idea but there is a good reason for doing it.
By transferringyour balance to a zero percent credit card you can ensure all yourrepayments go directly towards paying off your original debt and not get stucktrying to chip away at any accumulated interest. There will usually be a fee topay for a balance transfer but it will usually be worth paying, in the longrun, to get your original debt cleared faster.
Not prioritising your debt
Not prioritising your debt is going to result in a very difficult journey to paying it off. Some people simply don’t realise the gravity of the situation till bailiffs are at their door. Getting into debt is nothing to be ashamed of it has happened to millions of people and as long as you are sensible you can clear it and get back to normal.
So, don’t bury your head in the sand and instead bepractical. Work out which debts are the most important to pay off first, thiswill depend on your individual circ*mstances but for the majority of people itwill be the most expensive debt or the one with the highest rate of interest.
However, if you have any debts secured against your housemake sure to get those cleared ASAP. It’s also essential that you cover othercosts like utility bills and essentials like shopping as well. If you can onlypay the minimum payments some months just do that and try to pay more nexttime.
It might take some time to pay off your credit card debts put it can be done so just keep that end goal in mind.
