People living payday-to-payday can attest to the harsh and challenging situations since the pandemic hit. Staying at home meant less money in their wallets to cater to bills and other expenses, creating a financial nightmare for many. And the reality of things checked in immediately after lockdowns and curfews were lifted, and many families found themselves struggling to find money to meet basic needs.
A survey by The Money Charity in December 2020 showed that 8.9 million people were in debt because of the CoronaVirus pandemic. Data showed that the average credit card debt was £1,938 per household as of May 2021.
Below are some handy tips for help with credit card debt if you are among the unfortunate lot that experiences financial challenges during the Covid-19 pandemic.
1. Assess Your Situation
Never go into battle without knowing who you are facing. Draw a plan that highlights your attack and defence strategies before heading out. In short, sit down, determine what you owe, and to whom, and then work out how you will restructure your finances to settle the debts. The outstanding debts can be on different credit cards if you have several, which challenges getting accurate details of the debt. In the long run, taking a strategic approach ensures you do not forget a debt that sneaks up later.
It will be the time to judge yourself harshly or feel ashamed about your financial predicament. You could be dealing with emergencies like an illness, injury, or job dismissal. Sometimes, it is purely bad luck, like when your car, the only mode of transport to and from work, is written off in an accident. Perhaps you could be dealing with unavoidable home repairs. The examples paint how you can easily find yourself with a five-figure debt while still trying to work through a tight budget. A bad month in this day of high living costs can have rippling effects that see you burdened with debt that seems to spiral out of control.
2. Increase The Monthly Repayments
Suppose you know the exact credit card debt you are owed. In that case, you can make the minimum payments with the average interest rate, but you will do this over a long period (more than 18 years). However, you can drastically reduce that period to roughly 5-7 years or lesser if you allot a set monthly amount over the average minimum to offset the debt.
Increasing the monthly repayments helps you clear the credit debt faster. That amount you assume is too modest to make any difference will set you on the right track to becoming debt free.
3. Evaluate Your Credit Score
You are unlikely to access the best rates on loans, credit cards, and other financial aid if your credit score is less desirable. Therefore, consider signing up with websites like Experian, Clearscore, and others with free subscriptions to get expert tips and advice on how to improve your rating. You can enjoy an “instant credit boost” when you sign up with Experian, meaning you can improve your credit score soon after payments like for your subscription.
4. Transfer To Low-Interest Credit Cards
You may be a sensible credit card user, but what you own can balloon into unaffordable sums if you do not consider the high-interest rates. 2020 saw a 20.65% increase in the average representative rates, up from 18.67% in 2019. An increase significantly influences what you owe when you use your credit cards. Therefore, consider transferring to low-interest or zero-interest cards, which reduces your APR dramatically. It allows you to breathe as you try to manage the debt.
5. Seek Professional Advice
Never be ashamed or frightened by debt. Also, do not let your financial predicament overwhelm you. Furthermore, do not lie to yourself that your debts will go away if you decide to act ignorant. Speaking to a professional about your debts is the best thing to do when you are stuck in debt.
Start with your credit card provider because some of them are sympathetic and can offer to help you settle what you are owed by creating a favourable payment plan for you. It is a strategy meant to increase their odds of recouping what they loaned you. You can consider other options if this fails to deliver some reprieve.
For instance, you can get exceptional guidance from Citizens Advice credit card debt management. You will consult financial experts who advise you on the steps to take to ensure you pull yourself out of debt instead of sinking in further. Visit Step Change to find free expert debt advice and debt management charity. It has knowledgeable advisors providing nonjudgmental, practical guidance to resolving debts.