Lately it seems you can't pick up the paper without reading another bit about how the UK is becoming a nation up to its elbows in credit card debt. The statistics as quoted do indeed look bleak: according to figures provided by the Economic and Social Research Council, UK personal debt climbed above the ?1 trillion mark in July 2004 and has been increasing at the rate of ?1 million every four minutes. Over ?56bn of that debt is on credit cards. In fact, the average household debt in the UK is ?7,463.
Horrifying numbers - and yet, averages can be deceiving. If your neighbor owes ?20,000 on credit cards and you owe nothing, your average credit card debt is ?10,000. Even more heartening is the fact that only about 7% of us are over indebted - carrying more debt than we can pay off. That means that 93% of us are not in all that bad shape at all.
The secret to staying in that 93% of people who are not over indebted is to use credit wisely. Here are some tips on how to manage your credit cards wisely, from choosing the best credit card to how to use a bad credit credit card to repair your credit and get you back on track to financial health.
1.Compare credit cards to be sure you're getting the best credit card deal for you. When you compare credit cards and their features with your personal spending style, you can choose the best credit cards for your situation.
For instance, if your credit is healthy and you always pay your accounts off in full the moment you get them, them a cashback credit card could put money back in your pocket every time you use it. A cashback credit card that offers a discount on certain purchases can save you money on purchases made at your favorite stores. Other versions of a cashback credit card keep a running track of the amount that you've charged over the course of six months or a year, and send you a cheque for that amount periodically.
2.Remember that the best credit card in one situation may not be the best in another situation. Take that cashback credit card we were just talking about. It's a great deal if you're buying everyday items or small purchases that you're going to pay off before the next accounts due date. If you decide that you want a new patio set, though, and you'll pay it off over the course of the next six months, the interest that you pay on the purchase will wipe out any benefit from the cashback feature. Instead, the best credit card for that purchase may be one that offers no 'rewards' program, but has an APR several points lower than your cashback credit card.
3.If you've already made those mistakes and want to recover your credit, a 'bad credit credit card' can help. Some lenders and finance companies offer credit cards even to those with impossibly bad credit - popularly known as 'bad credit credit cards'. Most of these have high fees and higher interest - but they do offer the one thing that no other credit card offering may: they'll accept even those with the worst credit.
So how can another credit card help you get your credit back in shape? When you use your credit card and make regular, on time monthly payments, the credit card company will report your payments to the credit bureaus. It won't be an overnight miracle, but by building a current history of repaying your debts, you'll eventually reverse your adverse credit report.
It's easy not realize how much you've spent on vacation. It's difficult to hold back your credit card spending during the holidays and birthdays. If you've bought a house you probably have a hefty mortgage payment. And of course your car payment is a big chunk of your budget. Perhaps you've faced a few unexpected emergencies or had major medical or dental treatment.
Debt can be a lifesaver in an emergency situation but many people are drowning in debt. Unfortunately some of us think that an available balance on a credit card is the same thing as cash in the bank. If there's enough credit to go on a cruise, buy those expensive shoes, or go out to an elegant restaurant, well why not, we all deserve it.
Breaking down a $6,999.99 set of new living room furniture into easy monthly payments of $249.00 makes it easier to swallow. And what about that new car you've had your eye on? Never mind the price tag of over $20,000, it's only $389.00 a month. And then it happens your child needs a trip to the emergency room and suddenly you're facing a credit crisis. Your paycheck will only stretch so far and those "easy" monthly payments are pushing you under water.
The first step is to face the fact you have a problem. If you've been missing payments call your creditors and see if you can renegotiate the terms. It's possible you can lower your interest rate or get the late fees waived.
If your debt is more than you can handle you might consider debt consolidation services It's nothing to be embarrassed about if you decide to seek counseling. Taking that first step might be a challenge. You have to admit to yourself that you are over budget and tighten your belt. Some of the little luxuries that you think you deserve and probably very well do, are going to have to go.
Take the bus to work instead of driving your car. Brown bag your lunch instead of eating out. If you need to lose weight now is the time to go on a diet, you'll be trimming your waistline as well as your budget. Keep a money diary and record every penny you spend. You might be surprised to see where the money is going.
The sacrifices you make now to trim down your debt will pay off in the long term with a better credit rating. And in the short term you'll have a more positive attitude because you know you're doing something about your situation.
Debt consolidation can be a lifesaver but there is a downside. You might feel a heavy load has been lifted off your shoulders and that's true. Quite a few of the debt consolidation programs are dependent upon tying the loan to your house. It's in fact a second mortgage. If for whatever reason you can't make the consolidation loan payments you could lose your house through foreclosure.
Worrying about money and how you're going to make even the minimum payment on your outstanding balances can sap your energy. Don't wait until it's too late. No matter what you decide to do start with one small step.
Dee Power has sinced written about articles on various topics from Credit Cards, Sales and Negotiation and Business Plan. Dee Power is the co-author of several nonfiction books including "The Publishing Primer: A Blueprint for an Author's Succes. Dee Power's top article generates over 450000 views. to your Favourites.