Sunday, January 14, 2007

Is Your Credit Card Debt Spiralling Out Of Control

By Brian Wilton

A credit card is a useful way to spread payments throughout the month and means you don’t need to carry too much cash with you. You could also use your card to obtain a loan for a small amount over a short period. However, credit cards should not be used as a way of borrowing money over a long period. The less you pay off the more interest you will end up paying and the rate is likely to be much higher than a bank loan.

If you do not pay the full amount due on your credit card each month then a credit card debt will soon mount up. Credit cards are easy to use and it can be tempting to continue spending with no plans to repay the debt in full. If credit card debt is ignored then at some point it will have an impact on other areas of your personal finances.

Even if you make the minimum monthly payments this may only be 3% of the total bill. You will be charged a high rate of interest on the remainder so within a few months you may find your debt spiralling out of control.

If you are in this situation then you need to take action to reduce your credit card debt. First you should aim to limit your spending and ideally stop using the card. If you cannot clear the debt then at least aim to pay off more than the minimum each month. This will reduce the amount of interest added.

You could consider switching cards as many providers offer special deals on balance transfers. For example you could get a low, or even zero, interest rate for six months. If you can clear your debt within the low rate period then it is worth switching. However, if not then you will quickly loose any advantage once the rate reverts to normal.

Credit card debt settlement can also be achieved using a debt consolidation loan. This would involve taking out a personal loan at a lower rate in order to pay off your credit card debt. However, make sure you check all the small print for unexpected charges and restrictions on any new loan. Also remember that credit reference agencies keep track of credit and loan applications, and also report on your payment records. If lenders think you have too much outstanding credit then further applications may well be refused, particularly if you have missed payments.

Brian Wilton is prolific provider of clear and simple advice and tips on all areas of debt management. His latest card debt advice can be found at


ALEISH said...

The key to credit problem is discipline. Be punctual, pay your bill on time because late payments,
collections, and bankruptcies have a big negative impact on your credit score.

If you have credit problems and want to rebuild your credit, here is the list of lenders that provides bad credit cards and bad credit loans.

mybadcredit said...
This comment has been removed by the author.
Jon said...

What about an IVA? I found ClearDebt whilst searching online for IVA details (check it out in Google) or try They seem to offer some good impartial advice and their IVA page contains some great info as well as an online debt analyser.

steviejk81 said...

yeah, nice advice. Discipline with credit cards is a must have. I have a blog about debt issues too, if you want to exchange links let me know and I would be happy to link to you from my site free debt consolidation and advice. Steve.

Anonymous said...

Credit Cards, if used irresponsibly, can turn you life into total chaos.

Overusing and mishandling you card wont do any good to your credit score.

Nowadays, some lenders are offering cards for bad credit to people looking for bad credit creditcard, as one way of rebuilding their credit scores.But it is still highly advised to avoid getting into bad debts and credit problems, to avoid hassles.