Managing your cards: Avoid the danger of bad credit
Credit cards can be so easy to get and so simple to use that many people don’t realise the danger they can bring. From the age of 18 you are able to apply for credit cards and many financial institutions will encourage you to get a card and/or increase your limit over time.
It’s very easy to just flash the plastic and walk away with your purchase without thinking through how much it may ultimately cost you.
Managed properly, credit can be a great tool to achieve what you want, but if it’s not handled right you can end up with ever-increasing minimum monthly payments, bank fees and huge interest rates that eat into your lifestyle.
If you get behind in your payments your credit rating can be impacted, making it harder to get a loan for study, travel or your first home.
How to take control of your debt
The longer you wait before you a debt-free, the more that debt mounts up through fees and interest charges. Here are some useful suggestions on how to become free of credit card debt:
- Pay off the debt that has the highest interest rate first. Some credit cards charge 20% per year or more, so if you owe $5,000 you’re paying $1,000 in interest each year – and still haven’t reduced the debt by one cent!
- You could consolidate credit card debts into a loan with a much lower interest rate, making it easier to pay off.
- Develop a repayment plan with your credit provider to pay off a smaller amount every week.
- Stop spending on non-essential stuff while you are in the process of getting control of that debt.
One latte per day is around $30 a week you could be using to reduce your debt.
- Wherever possible, pay for things with cash or your debit card.
- When you receive credit card offers in the mail from the banks, don’t accept them. Avoid the temptation.