How to escape the vicious circle of credit cards
Credit cards when used with precaution and managed correctly can be to your advantage. We have all come across a point one way or another where we either thought about getting one or swayed to do so.
Either this was done for an urgent matter or you found another card offering a 0% interest rate for 2 years and decide to move a loan debt in there to save some money.
I remember a few years ago I found this great apartment and did not want to move-in my bed and mattress set because I wanted to buy a new one. I did not have the funds available right away neither in cash nor in my checking account and no one was keen to lend me a few hundred bucks at the time so I walked to the bank and filled-in my very first credit card application form.
Back in my twenties, just like most of my friends, my credit history was as clean as an unused virgin CD. Some of us were studying in universities while others were already building careers. But one thing we did have all in common was that we did not expect to fall in that trap a few years later. I had this one friend who took a Visa and a MasterCard with both having a £2000 balance on both cards and showing off as if it was his money. What he was doing really, is withdrawing cash from the first credit card to pay the other. It did work for a short while until interest rates kicked in where after a year, he had another £300 added up!
I personally think CC’s are fine for emergency use where you are in a situation that would require money to fix a problem or whatnot but unfortunately, some people choose to use them to pay for things on the spot with a voice inside their heads saying “oh well, I’ll pay it later when I get the statement you know”.
Western society bombards us with publicity, billboards and also TV shows like Sex and The City or Keeping up with the Kardashians to fuel the credit card society we live in now where many women try hard to live a lifestyle they really cannot afford! Magazines, new fashion trends, commercials and social media have easily influenced the younger generation and convincing them that you can look cool too, we have a credit card that won’t make you wait for your parents to give you some money because you can buy all that you want RIGHT NOW!
Now that you have summed up a few unpaid credit cards on top of each other, what is the fastest way to break-free?
The financial institution providing you the card is none of importance. Either it is AMEX, Lloyds Bank or Barclaycard; quite frankly, it really doesn’t matter. The most important element at this point is to take ownership of your mistakes and know what you got yourself into. A lot of people go on with their lives by giving up on the repayment process and simply living with debt and allowing it to accumulate even more due to the high-interest rate.
Therefore, if you are trapped in a vicious circle where your monthly payment does not tackle the actual debt but nearly covers a portion of the added interest due to its high percentage rate, you can consult websites such as Compare The Market and Money Supermarket. If you find the opportunity to transfer your actual debt to a 0% card and continue making regular settlements, this will allow you to actually scrape off the debt itself instead of making rich bankers richer. This is not a guaranteed solution for anyone to seek for but more of a case-by-case scenario depending on your credit history. However, it definitely is worth giving it a shot to compare offers and if you find one, jump on it!
At last, you would have to opt for the more traditional solution, which is seeking for an extra income stream. I would strongly suggest you read our previous article entitled Pay back your debt without hassle for more tips on how to tackle this problem.