Cut credit card debt ‘as fast as possible’
In taking steps to clear off money owed on credit cards as soon as possible, people should find they have more cash to spend on purchasing items, it has been reported.
Claiming money owed on credit cards is “the devil’s debt”, Neil Faulkner writes in a lovemoney.com article that the less interest consumers have to pay on debt will free up disposable income.
One means of getting to grips with how much is owed, he states, is to seek out a 0% balance transfer credit card. Mr Faulkner revealed that by using this feature, borrowers can transfer a balance that is currently incurring interest charges to a new home that will prevent it from accumulating any further interest.
The lovemoney.com writer also claims creating a budget to ensure more than the minimal repayments are made can be helpful, with setting up a direct debit to take money out of an online bank account an effective way of doing this.
An example of how credit card debt can be hard to shift is as follows - if you rack up a debt of £5,000 on your credit card, only making the minimum payment each month, it will take you more than 30 years to wipe the debt, after which time you will have paid over £5,000 extra in interest charges. However, by paying £200 off each month you will be debt free after 3 years.
In doing so, he asserts consumers should be able to avoid the problems that can be caused in missing a demand for payment. If just one repayment is missed, the competetive introductory rates that first made the account attractive, could be lost, as well as charges applied to the account.
Furthermore, a negative mark will be placed on a credit report, which could mean access to credit in the future could be a more difficult and expensive process.
Such claims come as Neil Munroe, external affairs director at Equifax, claimed that in the current financial climate people need to be as informed as possible when making an application for credit. Research by the firm showed requests for credit reports during the first quarter were up 9.6 per cent compared to the same period last year.
Filed under: Financial Advice