People’s cash-flow is getting stretched more and more each month. But if you’re finding yourself relying heavily on your credit card to get you through it’s time to have a serious look at your spending habits.
According to statistics from our survey, a little over 50% of the participants indicated that they don’t have a savings plan – yikes! This is worrying because it shows people don’t save… And when they don’t save, they are making debt.
A big reason why people can’t get out of debt is that they are using credit cards for all or most of their purchases. We’re not saying credit cards suck. There are advantages to having a credit card as it can be convenient to buy goods without using cash. It also gives you access to an interest-free loan if you can pay off the balance before the end of the month. But if you can’t do repayments each month credit card debt can increase at a rapid pace because of its high-interest rate. Leaving you stuck in serious financial troubles.
The key is to take control of your finances. How? By setting up your budget. Make a list of all your expenses, including non-essential stuff such as DStv, gym subscriptions or expensive foods. Then go through the list and only keep the essential items – which include car payments, rent or bond repayments, school fees etc. You might be surprised to see how much you can save by only cutting out a few items from your budget. If setting up your budget seems daunting we have the solution. Simply download our free budget template here.
Here are some tips to get out of credit card debt:
Stop using your cards
The best way to stop using your credit card is to cut it in half and throw it in the trash. It sounds dramatic but the truth is that a credit card that is still usable will get used. Making it harder on you to keep up with all the payments that reduce your credit card balance.
If you don’t want to destroy your credit cards, just put it away where you will not have easy access to it. Remember to do your monthly payments until the balance is paid off. At the same time, cut back on luxuries and spend money only on essentials. When you do pay for them, use cash or your debit card – this will ensure that whatever you buy is within your means.
Pay the minimum amount you currently owe every month
As you pay the minimum amount you owe each month, not only will your overall balance be reduced, but your minimum repayment will as well. If you keep paying a fixed amount per month instead of paying the newly reduced minimum amount, you’ll get rid of your credit card debt more quickly. Remember, all of this only applies if you don’t buy more stuff on your credit card.
Overpay your minimum repayment
If you find that you have extra cash in a month, resist the urge to spend it and rather put it towards reducing your credit card balance.
Use other savings to repay credit card debt
With the exception of retirement annuities, consider withdrawing money from an extra savings account to help with your outstanding credit card debt. Although you won’t have those savings at your disposal after you’ve withdrawn the money, you also won’t be paying high interest on a credit card balance. This will save you money in the long run. It’s important to note that you should not cut into your emergency savings to repay credit card debt. Unless your emergency saving is large enough to support a down payment on the credit card and still be enough to serve you during an emergency situation.
Get help from a professional
If you find that you can’t afford your minimum monthly repayments, it can be hard to get out of debt. Debt review can help you get a handle on your finances. Helping you meet your financial commitments for all the debt you owe. To find out more about debt review you can click here.
There are credit providers and banks that offer rewards for only using your credit card. Be careful of this. The rewards you gain will most definitely never be more than the interest and other charges you will have to pay for using your credit card. If you do want those rewards, start using your credit card as a debit card. Transfer funds onto your card and then use it.