Don’t Let Your High Interest Rate Credit Cost You More

April 21, 2009 by  
Filed under Earn Extra Money

Living in a culture addicted to credit, it can be difficult to break free from the ever increasing interest rates that have you forking out for more than you borrowed. Many a time the sole reason for choosing a particular credit card is for some benefit that is never even used, such as air miles. How can you use the air miles when you are too in debt to afford a holiday?

Sometimes the enticing adverts for these credit cards can hypnotize you into feeling a real need for them when in fact, you don’t. The common lure of air miles, which in theory sounds great, but usually you have to spend mega bucks to get to the next city and the interest you incur in the process renders the benefit void.

If you are finding yourself in this situation where your payment each month is largely to cover the interest and hardly reducing your balance, a plan of action needs to be applied to remedy this vicious circle.

Jot down your monthly outgoings and income. If you are in a relationship where you can share the bills, do so. Two incomes are better than one to pay off the bills and once they are reduced, the interest will also reduce.

Find out which debt has the highest interest rate as this is costing you the most each month. Try to put more into the payments for this card and clear the debt as soon as you can. Once the debt has been paid up, destroy the credit card. You will begin to notice a big difference in your available cash which can go towards the rest of your debt.

Trim the luxuries down to a minimum, it may be difficult for a while but paying off your debts will see you enjoy luxuries two fold in the future. Maybe this year you can miss out the annual vacation and do something cheap and cheerful such as a camping holiday (you might find you have just as much fun). Anything that can practically be omitted from your monthly spending is a bonus and all goes towards your future debt free lifestyle.

If you are finding it difficult to muster up the cash even with reducing outgoings, it might be a good time to borrow money from a family member or a close friend. They will understand your plight and if they can, will be only too happy to help. As soon as you can, make sure they are first on the list to pay back.

Advice given by financial advisors is to put aside around 7% of income as savings which will accrue interest. Paying more interest on your debts than receiving for your savings is not an efficient way to appropriate your money. Once you have cleared your debts, open a high interest bank account and start saving. Little by little you will build a nice nest egg for you and your family.

Being in debt is detrimental to your mental health which could progress to affecting your physical health. Credit cards may seem like a glorious prospect at first but before long, they are your worst nightmare. Make sure you are dedicated to paying off your debts and you will begin to feel clear-headed and full of optimism again.