The allure of spending money on your credit card and worrying about it later is something that many of us struggle to resist. After all, the very nature of a credit card allows us to make purchases in the here and now, without necessarily having the required funds in place.
However, given that the average household credit card debt in the UK is £2,033, we could probably all do with improving the way we keep on top of our credit card finances. Below, we introduce you to some of our tips that will help your credit card spending habits.
Create a monthly budget
The power of monthly budgeting is hard to dispute. Fully understanding how much you earn and how much you spend each month is super important when it comes to improving your financial management. Whether you set up a simple spreadsheet or use a budgeting app to help you, getting deliberate with your spending is a vital first step.
By accounting for your income each month, you will become less reliant on your credit card. You should also factor in the monthly repayments so you can clearly see how long it will take you to repay your debts.
Review your monthly statements
While you might check your current account statement regularly, you’re not alone if you turn a blind eye to your credit card statements. Perhaps this is born out of a desire to ignore what you’ve been spending each month, but doing so isn’t such a smart move.
Reviewing your monthly credit card statements is a way of holding yourself to account. You can also see in real-time how much you’re being charged in interest, which may motivate you to rain things in a little and consider alternatives to high-interest credit cards.
Establish spending limits
When you’ve put together your monthly budget, it’s a good idea to establish a credit card spending limit. Whether this is £100 or £1,000, you should set a spending limit that is relative to your income. One of the biggest issues with credit card debt is that things can easily get out of hand if you’re not disciplined with your spending and repayments.
If you limit yourself to how much you can spend on your credit card each month and are consistent with your repayments, you will be able to work your way out of debt over the course of a defined period.
Increase your repayments
You will notice that you have the option of making the minimum payment on your credit card each month. This is essentially a way of servicing your debt, and it doesn’t actually reduce the amount of money that you owe each month.
When you’re putting together your budget, it’s helpful to increase your credit card repayments, so you’re paying more than the minimum amount each month. This will see your credit card balance going in the right direction and will do more than keep the amount rolling over until the following month.
Consider debt consolidation
If you owe money on multiple credit cards simultaneously, you might want to consider applying for a debt consolidation loan. Put simply, a debt consolidation loan enables you to bring multiple forms of credit together into a single loan.
When done properly, you can simplify your borrowing and even save money. At Koyo Loans, we offer unsecured personal loans between £1,500 and £12,000 that can be used as debt consolidation loans. 24.9% APR Representative.
If you’re approved for a personal loan, you can use the money to pay off your credit cards and then start the repayments on the outstanding loan that you’ve just taken out. For many people, this can make the process of repaying debts much easier, and it may even save you money in the long run.
If you’re interested in applying for a debt consolidation loan, start with our loan calculator to discover how much you can borrow and get in touch with us if you have any questions.