Credit card debt can be difficult to manage. The deeper one is in debt, the harder it can be to get out. Managing any kind of debt involves developing (and maintaining) good habits. Budgeting and minimizing spending are good places to start. However, these will only go so far. To potentially save money on debt repayments, the solution lies in obtaining a lower interest rate, which can be achieved through options like a credit card balance transfer or refinancing with a personal loan.
By allowing you to compare credit card offers from top providers, Fiona could help you pay less in interest.
Struggling with Credit Card Debt
People struggle to manage their credit card debt for a number of reasons. Those with poor credit scores are generally only able to access cards with higher interest rates, as a low score could imply someone who struggles to manage their spending and payments. Failure to pay a credit card balance, on time or in full, can result in interest charges and possible penalty fees. In addition, a cardholder who fails to pay down debt on their account can have a high credit utilization ratio, which is the percentage of unpaid debt measured against their credit limit.
These issues can adversely impact a person’s credit score, making it harder to qualify for new credit and other financial services. Here are some options for managing credit card debt, and possibly improving your credit score in the process.
Performing a balance transfer to a different credit card can help alleviate the pressure of mounting debt. By transferring debt from a high-interest credit card to another card with a lower APR, a consumer can save money on interest while paying off the remaining balance. Some cards even offer introductory APR promotions, featuring 0% interest on balance transfers during a fixed amount of time. To decide if a balance transfer is worth it, it’s important to do the math to calculate the potential net savings. Often a fee is charged for performing the actual balance transfer, however, these fees are often outweighed by the money saved on interest.
Consolidation and Refinancing
Refinancing or consolidating debt with a personal loan are also options for managing credit card debt. By paying off and refinancing an existing credit card balance with a personal loan, a borrower can receive a better, fixed interest rate for their repayment plan. Consumers can also consolidate multiple credit card debts with a personal loan, which can make the debt easier to manage and lower their monthly payment. In some instances, a borrower with good credit can achieve all of the above —simplifying multiple debts into one monthly bill, while lowering their payment and interest rate.
Budgeting is helpful when trying to maintain good financial health. Furthermore, budgeting monthly spending on a credit card can prevent a consumer from going over the account’s credit limit, while keeping their overall credit utilization ratio low. A credit utilization ratio under 30% is considered good, and gives a consumer the ability to raise their credit score over time. While budgeting will not diminish a cardholder’s existing debt, it can establish a good routine to prevent new debt from building, which can help a consumer get out of debt faster and enhance their credit report going forward.
Managing credit card debt is tricky as it can involve many moving parts, especially if a person has more than one account. With a little help from tried and tested practices like budgeting and repurposing of debt, things can be easier. Options like balance transfers and debt consolidation or refinancing are available through Fiona, which matches consumers with financial products that best fit their needs.