With rising prices of many goods and services, you may find yourself more and more dependent on your credit card to cover daily expenses. However, with high interest rates and penalty charges, if you miss re-payments, credit card debt can quickly add up.

If you are trying to manage your money a little better, the Competition and Consumer Protection Commission (CCPC) has put together a practical five step plan to help you get back on track to being debt-free.

1. Don’t hide from your finances

The first and most important step is to face up to your credit card bill as soon as it arrives. If you’re worried about accumulating debt you may not be able to repay, stop using your credit card completely, if possible. Fight the temptation to use it for day-to-day expenses by leaving your card at home.

2. Plan your repayments

It is important that you pay as much as you can afford off your bill every month. By paying more than the minimum payment (by even a small amount) you will reduce the time it takes you to be debt free and save you money in interest.

For example: If you have credit card debt of €1,000 and the interest - known as APR - on your card is 17%, it will take you two years to clear your debt if you pay off €50 a month and you stop using the card completely.

However, if you increase your repayments to €100 per month, you could clear your balance in 11 months. So, the debt is paid off 13 months earlier and you save in interest repayments.

Check out the CCPC’s credit card calculator at ccpc.ie which will show you how long it will take you to clear your credit card debt. It will also show you if there is an alternative credit card with a cheaper interest rate that you could switch to, to save even more money.

3. Check to see if there is a better rate available

Interest rates for credit cards currently range from 13.8% to 26.6%, so it could pay to switch. Some financial providers offer 0% interest on transferred balances for a limited introductory period.

So, if you move your balance, every cent you pay will reduce your debt, as you won’t be paying any interest on your balance during that period.

The CCPC also has a credit card Money Tool which allows you to compare interest rates on offer across all the main financial providers. You can also check to see if you could switch to a provider that offers 0% on balance transfers for a period of time, to help you clear your balance.

4. Consider a personal loan

Although you may feel reluctant to take on more debt, it can make better financial sense to take out a personal loan to pay off your credit card debt. Interest rates on personal loans are generally lower than on credit cards.

However, it’s important to stop spending on your credit card, or else you will be faced with both the loan and credit card repayments. Check out the CCPC’s personal loan comparison tool at ccpc.ie to compare the costs of loans and work out how much your repayments would be.

5. Manage how you use your credit card

It’s important to manage your credit card, to help keep debt to a minimum and ensure that your credit rating and ability to borrow is not affected.

Manage your credit card a little better

  • Try to keep your credit limit low and don’t view it as a spending target.
  • Consider reducing the credit limit to an amount you can comfortably afford to repay every month, so you are not able to run up debt you can’t repay.
  • Don’t use your card for cash withdrawals except in emergencies, as you will be charged a high rate of interest often from the day you take out the money, as well as a cash advance fee.
  • Set up a monthly standing order or direct debit for the minimum monthly repayment, or more if you can afford it, to avoid late payments.
  • Top Tip

    Set yourself a ‘money goal’

    If you find you are on top of your credit card debt and have money left over at the end of the month, try setting yourself a ‘money goal’.

    For example, could you put your extra funds into a regular savings account to help you reach a specific savings goal – e.g. a holiday, a deposit for a new car, or maybe a longer-term goal such as a mortgage deposit, or paying into a pension plan.

    More info

    To learn more about managing your personal finances, visit ccpc.ie

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