A credit card can be a very useful way to borrow money for a short-term. It is widely used to buy items from a shop as well as online. But, if used thoughtlessly it can result in the piling up of a huge debt which you may find difficult to repay. The temptation to spend is very high when you know that you can use your card now and repay later in instalments. This can lead to a Credit Card Debt which can topple your financial balance.
Here, we will explore some of the ways to manage your credit card arrears. We discussed this with the financial experts at Lawdepot.com and got some useful tips which we would be sharing with you. We will outline some of the methods to avoid running up a huge credit card bill that you may have a tough time repaying.
Do Not Run Into Credit Card Arrears
All cards have a minimum payment which you would be required to pay back every month. This would usually be 1-3% of your outstanding amount. You can go on just paying the minimum amount for some time without any consequence. But remember, the longer you keep paying just the minimum amount, the longer it will take you to repay the entire amount. So, it is advisable to pay more than just the minimum amount if it is something you can afford. If you fail to pay the minimum amount too, your credit card balance will go into arrears. You might get calls from the creditor demanding payments.
Debt On Your Joint Credit Card
Your card provider may have given you a second card in the name of your spouse or someone else. Before getting a second card, think well as you will be liable to pay the money to spend using both the cards. If the card is issued against your account – even if the card has your partner’s name on it – you will have to pay the money. So, think twice before opting for this feature.
Stay Within Your Card Limit
Almost all cards have some credit limit which is meant to check your overspending. The credit limit of your card would be based on your credit history. If you have a poor credit history, then your card would also have a higher rate of interest. Paying back on time will help improve your credit rating which will prompt other providers to give you a card with a higher credit limit and lesser interest rate. If your card provider offers you a higher credit limit, think whether you need it before you accept it.
Know Your Interest Rate
The interest rate on your credit cards can vary from less than 10% to more than 70%. It depends on the type of card you have which, in turn, is dependent on the credit rating. Some cards offer an interest-free period of 60 days for you to pay off the debt without any interest. If you miss payments, you will also have to pay late payment charges in addition to the interest amount.
Make sure you use your credit card judiciously.