Get your credit card debt under control

September 27, 2006

By Peter Kenny

With the use of credit cards increasing everyday and many people using credit cards to pay for smaller items on a day-to-day basis, many consumers are under threat of getting further into a debt nightmare.

The other day, while queuing in my local newsagent, I noticed someone in front of me paying for their newspaper. Even though the purchase only came to £0.95, a credit card was used. Now even with the use of Chip and Pin at credit card terminals in place throughout the country and in turn reducing the wait times at points of sales, the time taken was considerably more than simply handing over a £1 coin.

This action brought home to me how much credit cards have become the preferred choice over the use of cash, even for small day-to-day items. I am definitely all for easier and more efficient forms of payments, however, I am just a little uneasy about credit cards being used this way.

There is no denying that credit card debt is on the rise. Each quarter we are told the latest credit card debt figures and although they are rises are not increasing, the debt is still going up. Every day UK consumers are borrowing millions of pounds using credit cards and store cards. What worries me is that many people are using their credit card to make smaller purchases more frequently and not realising their debt is rising. Often credit card debt built up this way can easily get out of hand.

We have just heard this week that many credit card companies and banks have quietly increased their interest rates and balance transfer fees so now is maybe the best time for UK consumers to take a closer look at their credit card use.

Control credit card use

We always advise people to look at their spending patterns, especially their use of credit cards. There are two ways a credit card balance can be reduced, increase monthly payments or reduce the amount of times a credit card is used. Instead of using a credit card for small purchases, consumers should try and use cash instead. Only use a credit card for larger, planned and budgeted expenditure.

Pay off credit cards with higher APR's first

If a person has more than one credit card with an outstanding balance on each, they should concentrate paying back the balance owed on the credit card with the highest APR first. This of course will mean that only minimum payments will have to be made on the other credit cards, however, this will still be the better option.

Avoid minimum payments

Minimum payments are best avoided, unless they have to be used in the scenario above. Use our minimum payment calculator to work out the costs by keeping to a credit cards minimum payment. The results are disturbing yet many consumers keep to minimum payments each month not realising just how much interest they are paying.

For more debt advice please use the following:

National Debtline - 0808 808 4000
CCCS - 0800 138 1111
Citizens Advice Bureau