According to recent studies by credit information providers Equifax, 56.6% of people do not pay off credit card debt in full every month, meaning that more than half of Britons are subject to the high interest rates associated with credit card debt and are at risk of getting into debt problems if they are unable to afford their payments. 63.1% of people in the UK use credit cards to pay for everyday living expenses. Using plastic regularly to pay for daily expenses or long term financing can create increasing debt if you find yourself falling short of the repayments.
Of course we are all aware that we should pay off the balance on our credit cards every month to avoid interest and penalties. However, 24.6% of those surveyed responded that they had an outstanding balance of between £1000 and £5000, meaning almost a quarter risk creating debts that can't be easily cleared, and even more, 27.3%, believe it will take them more than a year to pay off their debts, if they ever can!
If you are regularly spending more than you have, you need to start making cuts. Often this means cutting up credit cards, and paying them off. It might mean reducing your spending on clothes, groceries, entertainment, or another area you wouldn't think of. The trick is to know where you are overspending.
By using a budget planner you can begin to take the reins on your debt. Once you start to analyse your monthly incoming and outgoing transactions, it becomes much easier to gain perspective on how much different aspects of your life are costing you, and you can think of ways to cut the unnecessary spending.
Money Dashboard can help with this. By registering your bank accounts, Money Dashboard will automatically start tagging your incoming and outgoing payments, and you can start comparing data and budgeting for the future. It's also absolutely free!
How to Save Money
Once you have started budgeting, here are some other tips to help with debt on credit cards:
- To avoid penalties, pay off at least the minimum on your credit cards each month.
- Consider transferring your debt balance to another credit card. You could save money by taking advantage of introductory interest rates on new cards, but be sure to factor into your budget calculations that the introductory rates are temporary. Also, if you are transferring your balance, be aware that there can be a transfer fee of 2-3%. If you get a good deal, it might be worth paying this transfer fee, but do the maths before going ahead.
- If you find yourself under budget, save the money. Don't use it as an excuse to go over budget next month; it may come in handy for future unforeseeable expenses.
- Plan your budget with a goal in mind, such as paying off all credit cards by this time next year, or to pay off your debts before a holiday so that you can indulge yourself while you're away from home.