Overheard: "My credit card? I don't want to go there. When I think about my balance my head hurts."
Sounds familiar?
Yet, you are probably planning to squeeze what little money is left on your credit card to go shopping for Christmas, aren't you?
But if this is the season for gift-giving, why not treat yourself? Go easy on the credit card spending and enjoy less financial stress in the coming new year.
Now, let us look first at why credit card debt is so painful. It is due to a little thing call interest. When you have an outstanding balance, the credit card companies add to that balance by charging interest. This penalty is the reason why you feel that even when you make a payment, you can't get ahead. And if you are only paying the minimum well, you will be paying off that debt forever. Consider the interest rates charged by the credit card issuers for local currency cards:
RBTT: 46%
Scotiabank:
44.75% - 49.75%
National Commercial Bank:
49%
First Global Bank: 39%
First Caribbean
International Bank: 48.5%
Of course, if you pay off your debt before the due date, you won't have to pay any interest at all. But, then you wouldn't need to read this article, either. Still, if you have credit card debt, there is a way to lessen the pain. This is achieved through discipline.
What to do now?
Here's the simplest step to take LEAVE YOUR CREDIT CARD AT HOME.
Another step is to only use cash this Christmas. Money instructor.com offers additional steps.
1. Stop the Madness
Eliminate all unused cards, and officially cancel them.
2.Reduce
Your Limit
If you are going to keep your credit cards, then don't let your credit limit increase. You just dig yourself deeper into debt.
3. Budget Your Purchases
Set up and stick to a budget. Track where your money goes each week to eliminate wasteful spending habits.
Going forward
For the new year take these steps.
Step 1: Make a list. Include:
Your current credit cards.
The amount outstanding on each.
The interest rate accruing to each.
The minimum repayment you have to make on each.
Step 2: Rate your credit cards from the highest to the lowest interest rate.
Step 3: Add up all the amounts you have in the minimum payment column.
Step 4: Fit the debt into your life
a. Calculate how much money you earn each month.
b. Deduct the sum of:
(i) your rent/mortgage payment
(ii) your average home bills (e.g. electricity, water and phone)
(iii) your food and transport costs.
Step 5: From the net sum remaining work out how much can go towards credit card debt. It is advisable to clear off the highest cost debt.
Financial columnist Gary Foreman adds, "To reduce the highest cost debt, transfer the debt to a lower cost card. Perhaps it's to a card that you already carry. One caution. Many cards charge you to transfer a balance to them. Some treat it like a cash advance. Make sure you know what charges, if any, will be applied before you make a transfer. "So, this Christmas give yourself the gift of less debt.
