Credit Cards | Credit Crunch
With
the abundance of credit cards on the market today it is easy to see how and why
credit card debt is so common.
Also, because of the competitiveness of that particular
market, credit cards are widely available
and therefore people from all walks of life have
access to them.
Some people who don't even have the appropriate means of repayment can even get
credit cards.
This page will provide you with some information and FAQs on credit cards and their related
debt. You can hopefully avoid falling into the credit card trap of high interest and constant
draining monthly repayments.
Some Types of Credit Card
- Balance Transfer Cards - Balance transfer cards are available for consolidating your debts from other cards. These cards offer 0% interest on your transfers. To help alleviate your charges and interest that you have been paying. You could save hundreds of pounds.
The market is VERY competitive with these types of card. Most providers offer 0% interest for a specified number of months. These cards are particularly good if you maximise what they offer. In other words, with great commitment, you should aim to have all or most of the debt paid off within the timeframe of the 0% interest. If you don't do this, you could get landed right back into high interest payments. The same applies if you purchase anything with these cards. You need to focus on using the card as a repayment plan for your debts.
- Cashback - Cashback cards are most suitable to the fortunate people who manage to clear their full statement every month. The cards offer a percentage cashback offer on purchases, sometimes up to as much as 5% on each purchase. So you can actually make money while you spend money. It is like a type of reward scheme. Remember, these cards are encouraging you to spend, so steer clear of them if you cannot afford to repay each month.
- Rewards and Incentive - Rewards and incentive cards are similar to cashback cards, in the sense that they offer you something in return for your money. The reward is normally a points based system; so many points per pound spent. As above, this type of card is mainly recommended for people who can spend and pay off the balance in full on the due date.
Should I transfer my balance?
If you are struggling to pat off your credit cards or even reduce the balance, if all you seem to be doing is paying off the interest, then the answer could be yes, transfer. You could save hundreds of pounds by doing this.
Credit Card Debt example
Debts
|
- You have two credit cards: One at approx £4800 and the other at £3000
- You can only afford to pay a little above the minimum payment each month and the apr is 16.9% and 19.9% respectively
|
| Solution |
- You decide to apply for a credit card and transfer your balances. The balance transfer deal is 0% for 12 months. There is a charge of 2% for the transfer, however, with that charge included, you could still make a saving of over £1,250 on interest within that year. You are successful in the application and when it goes through, you cancel your old cards, and pay off as much as you can every month on your new card. You do NOT use your new card for purchases.
|
Monthly calculations of the above example based on repayments of £120 per month
| Months |
Card 1 £4800
on 16.9% apr |
Card 1 when transfered
to
0% apr card |
Card 2 £3000
on 19.9% apr |
Card 2 when transferred
to 0% apr card |
| Jan |
4800 + interest
-120 = 4747.60 |
4800 + 2% charge
- 120 = 4776 |
3000 + interest
- 120 = 2929.75 |
3000 + 2% charge
- 120 = 2940 |
| Feb |
4747.60 + interest
-120 = 4698.47 |
4776 - 120 =4656 |
2929.75 + interest
- 120 = 2858.34 |
2940 - 120 = 2820 |
| Mar |
4698.47 + interest
- 120 = 4644.64 |
4656 -120 = 4536 |
2858.34 + interest
- 120 = 2785.74 |
2820 - 120 = 2700 |
| April |
4644.64 + interest
- 120 = 4590.05 |
4536 - 120 = 4416 |
2785.74 + interest
- 120 = 2711.94 |
2700 - 120 = 2580 |
| May |
4590.05 + interest
- 120 = 4534.69 |
4416 - 120 = 4296 |
2711.94 + interest
- 120 = 2636.91 |
2580 - 120 = 2460 |
| June |
4534.69 + interest
-120 = 4478.55 |
4296 - 120 = 4176 |
2636.91 + interest
- 120 = 2560.64 |
2460 - 120 = 2340 |
| July |
4478.55 + interest
- 120 = 4421.07 |
4176 - 120 = 4056 |
2560.64 + interest
- 120 = 2483.10 |
2340 - 120 = 2220 |
| Aug |
4421.07 + interest
- 120 = 4363.33 |
4056 -120 = 3936 |
2483.10 + interest
- 120 = 2404.28 |
2220 - 120 = 2100 |
| Sept |
4363.33 + interest
- 120 = 4304.78 |
3936 - 120 = 3816 |
2404.28 + interest
- 120 = 2324.15 |
2100 - 120 = 1980 |
| Oct |
4304.78 + interest
-120 = 4245.41 |
3816 - 120 = 3696 |
2324.15 + interest
- 120 = 2242.69 |
1980 - 120 = 1860 |
| Nov |
4245.41 + interest
- 120 = 4185.12 |
3696 - 120 = 3576 |
2242.69 + interest
- 120 = 2159.88 |
1860 - 120 = 1740 |
| Dec |
4185.12 + interest
= 4244.14
|
3576 |
2159.88 + interest
= 2195.70 |
1740 |
| Amount paid off |
555.86 |
1224 |
804.30 |
1260 |
| Balance transfer savings |
668.14 |
455.7 |
| Total Savings |
1123.84 |
Can we help with your debt problems?
To find out if McCambridge Duffy can help you regain control over your finances before matters are taken out of your hands, or to find out if you qualify for an IVA, simply get in touch:
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