Take control of your credit card debt
Take control of your credit card debt
Credit cards can be a useful payment option if you use them wisely. If not, they can quickly cost you more and more. A few simple tips can help you stay in control of credit card debt.
Sometimes a credit card is a convenient way to pay for goods for example when you’re buying online or when you don’t have enough money to last until your next payday. But you need to make sure you only spend what you can afford to pay back within the interest free period – otherwise you’ll pay a lot more for your purchases.
It’s tempting to only pay back the minimum or just over, after all you’re meeting the bank’s payment expectations. But this is how interest can really add up. The longer you leave your card unpaid, the more expensive it gets.
Let’s say you receive a credit card bill for $1,000 with an interest rate of 18% and you make payments of $20 per month.
If you don’t spend any more on your credit card, it will take you nearly eight years to pay off your credit card in full. It will also cost you a whopping total of $1,862 - $862 of which is interest.
Paying back more than the minimum is essential to minimising interest costs. If you can’t afford to pay off the entire amount at once, try to pay back what you realistically can afford each month.
If you increase your repayment to $50 each month for that $1000 balance, you’ll pay $198 in interest and take two years to pay off your card. A higher monthly repayment of $100 will see your card paid off within 11 months, with a total interest cost of $91.
Sorted has a Credit card calculator to show you how much your credit card is costing you. Once you understand what your credit card costs it’s easier to take control and get out of debt.
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