New research has revealed that over a quarter (26 per cent) of Brits expect to owe money on their credit cards throughout 2012, with nearly one in ten (9 per cent) admitting they are relying on their plastic to make ends meet.
The survey also asked people to look at their essential outgoings and bills and say where they felt they could make savings in 2012. Food shopping and transport costs topped the list with gas and electric close behind. Only 15 per cent of households felt there was nothing they could do to make savings.
“It is clear from our research that a huge number of people are already expecting 2012 to be a ‘year of debt so its important that they take action now, rather than allowing interest to add to their financial burden.”
1. The first step to managing your debt is to take control.
When your statement arrives, dont ignore it; your debt will increase as interest is added to the outstanding balance.
2. Dont just make the minimum repayment.
Card issuers add interest to any outstanding balance so the longer you take to repay the debt, the more money you will owe. For example, it could take up to 34 years to repay a debt of £5,000 if you only make the minimum repayment each month. Also, if you have more than one card, pay off the most expensive card first.
3. Switch your credit card.
Transfer your credit card balance to a card with an extended interest free period on balance transfers – these usually charge a small balance transfer fee of around 3% which will initially be added to the debt but is still worth doing if you can get 0% interest for 24 months. Alternatively, if you are unlikely to repay a significant part of your debt during the 0% interest free period, switch to a card with a low interest rate for the lifetime of the balance transferred. This will immediately reduce the interest rate until the debt is paid off.
4. Avoid fees for missed payments and cash.
Typically card issuers charge around £12 for missed payments, also avoid using your credit card as a cash card – the additional charges make this an expensive way to borrow money.
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