Credit Card Debt

Dealing with credit card debts

Dealing with multiple debts isn't easy. Aside from the sheer complexity of making so many payments every month, it can seriously complicate your financial planning, making it much harder to figure out how long it'll take you to get out of debt - and how much interest you'll pay in the meantime.

That doesn't mean you're powerless: there might be a number of approaches you could take to improve your control over your debts.

No 1: overpay your credit card debts

First of all, you could try to overpay your debts: pay them off more rapidly than actually required. Debts usually accrue interest - and the higher the APR (Annual Percentage Rate), the faster it'll happen. So rather than putting a bit extra towards each one, it makes sense to pay off the credit card debt with the highest interest rate first.

If you decide to overpay your credit cards, you'll basically pay everything you have to in a month, then put all your spare cash (or as much as you can bring yourself to use) towards the credit card with the highest interest rate. Once that debt's been paid off in full, you'll use your spare cash every month to overpay the one with the next-highest interest rate - and so on, until they're all gone.

Of course, overpaying your debts does require a lot of discipline, since it's tempting to make just the minimum payment from time to time...

No 2: consolidate your debts with a loan

One way of 'forcing' yourself to stick to a firm schedule is to consolidate your debts with a loan: borrow enough to pay them all in one go, and arrange to repay that loan over a realistic timeframe. Ocean Finance provided this article to help people understand the different ways of dealing with credit card debts - including debt consolidation loans - so take a look at their website if you'd like more information.

Consolidating your debts would give you the opportunity to look at your finances and decide how much you can reasonably afford to put towards your debts every month. Once you have that monthly figure, you can calculate how quickly you could repay the debt: you should arrange a repayment period that's long enough to keep your monthly payments realistic, but short enough to keep interest to a minimum (since repaying any debt over a longer period of time will mean it costs more in interest).

Just be careful about securing any debt against property, as your home could be at risk of repossession if you don't keep up payments on a debt secured against it.

No 3: consolidate them with a credit card

You may prefer to pay off your credit card balances with a kind of credit card known as a 'balance transfer' card. You'd basically transfer all your credit card debts to that card, then work on paying it off with just one payment per month.

This could make keeping track of your outstanding debt a lot simpler, and you'd pay no interest at all for as long as the card's introductory interest-free period lasted. Just bear in mind that you'd pay a balance transfer fee when you actually shift the debts to your new card - and of course, if you don't repay the debt in full before the end of that period, you'll end up paying interest on it again.

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