THE Bank of England last week hiked interest rates to 1.75%, the biggest increase in 27 年 – but what does that mean for your credit card debt?
However credit card rates have been increasing in recent months, and may well go up again as interest rates going to climb.
This means that you could end up paying more if the interest on your card goes up.
The ideal way to use a credit card is to clear the balance in full every month as this way you don’t start paying interest – but this isn’t always possible.
But Francesca from budgeting and debt blog The Money Fox said that getting on top of your credit cards now could help you understand where you might be able to make savings.
Here are her top tips for managing your credit card:
Know where you stand
首先, you need to make a list of all your debt and understand the interest rate you’re paying on it – are the rates on fixed deal, or are they variable?
“It’s important to know where you’re at currently so you can work out if there’s any action you need to take,” said Francesca.
This exercise doesn’t have to be complicated – get all the cards out of your purse and write on a piece of paper how much you owe on each one, what the interest rate is, and when that rate expires.
Then you will know what you are dealing with, even if it feels overwhelming to begin with.
Consider balance transfer
If you have a credit card with a high rate of 兴趣, it might be worth seeing if you can transfer the debt on it to another card with a better rate.
一个 0% balance transfer deal means you don’t pay any interest on the money you owe for a set period.
This will help you pay off your debt faster, as any repayments you make will chip away at the debt amount, rather than just pay off any interest.
But these cards do sometimes charge a fee to move your debt, so you need to read the small print.
“Check the terms on these cards before you start,” 弗朗西斯卡 说.
She recommended using MoneySavingExpert’s online tool to check if you are eligible for a card before applying too.
在这一刻, NatWest, Sainsbury’s Bank and Santander all offer a 0% balance transfer card with no fee, allowing you to keep your debt on that card for either 21 或者 22 月, depending on which provider you choose.
Choose what to pay off
If you can afford it, it is worth trying to clear some of your debt on your credit cards so you’re not hit by higher interest rates if your provider chooses to increase them.
It is worth working out which debt to pay off first, but that depends on your circumstances and the different deals you have on various cards.
“You might want to go for the highest interest rate to save paying more on interest, or do you want to go for the smallest debt to get it gone and out of the way,” 弗朗西斯卡 说.
Even if you can’t afford to pay off the whole amount, pay off more than the minimum payments each month if you can afford to.
This reduces your overall cost as you won’t be paying interest on the debt for as many months.
Drawing up a budget for your overall spending is the best way of working out how much you can afford.
Consolidate your debt
Credit card debt consolidation is when you bring your existing debts onto one credit card.
It can help simplify your repayments and make your debts more manageable as you just have one monthly payment to make.
But there could be a one-off transfer fee to move the debt to a balance transfer card, and you could face a high interest rate after the low or 0% introductory period ends.
被警告 – if you miss repayments, you might be hit with penalty charges or lose the 0% 提供, meaning you could ultimately end up in a worse position than you started in.
And interest rates could be high if you use the card for new spending.
“You can look into consolidating, but there are pros and cons.
“Make sure you do your research and seek advice,” 弗朗西斯卡 说.
Ask for help
Francesca said that burying your head in the sand about credit card debt won’t help you, even if facing up to the problem is scary.
It is really important if you are struggling to pay the minimum amount on your credit cards that you tell your lender, as they will probably be able to help you.
弗朗西斯卡 说: “Speak to your lenders and explain your situation.
“See if they are open to freezing your interest or reducing it.”
Providers should work with you to come up with an affordable payment plan if you’re struggling to keep on top of your debts.
You might also be able to use the Breathing Space scheme – this stops you being charged interest or penalty fees for 60 days to help you get back on track.