Credit card & lock

Your flexible friend can suddenly leave you high and dry – do you have credit card debt problems ? Can’t seem to pay down the ever-increasing balance ? Wonder what you have to do to resume a normal healthy credit card relationship ? The Money Doctor gives 5 tips on tackling that credit card balance before it overtakes you :

 1.Don’t put your head in the sand when your monthly bill comes in


        • we spend over € 2.2b at holiday periods on credit cards and outside of those periods c. € 780m per month
        • half of us only pay the minimum requirement – at some of the rates the credit card companies charge, it would take up to 20 years to pay off the credit card debt if only making minimum payments
        • best card deals ? AIB Click card 9.11%, Permanent TSB 17.3%

2. Pay off your credit card bill in full if you can


        • there are so many options to pay off your bill rather than leave debt at expensive interest rates
        • you are still availing of free credit ( from the time you buy something to the time you receive the credit card bill and are given so many days to pay  )
        • Longest free credit period ? Some store credit cards will allow you 56 days to pay your bill ( but then if you don’t. you are charged 18% + )

3. If you cannot pay off the card debt immediately, transfer your card balance to another credit card company offering 0%


….for up to 7 months ( Bank of Ireland ) up to 6 months ( KBC Bank, Permanent TSB and Tesco Clubcard ) This at least buys time while you consider how you are going to dispose of the debt. You will need a clean credit history to transfer.

4. Look at personal loan options ( unsecured loans )


        • The best interest rates – e.g. 6.5% for student loans, 7.5% for car loans – you will find are with your friendly local credit union
          • MUST either be living locally or working locally to the credit union
          • most require that you be a member for at least a month before applying for a loan
          • normally for the first loan, you would have to lodge up to 25% of the amount you wish to borrow … e.g. you want € 4,000, you would have to lodge € 1000 into an account.
        • Bank of Ireland at 11.5% (online) 12.8% (in-branch) with AIB Bank similar rates.

5.If your loan repayments exceed your income, consolidate if you can or are let, but do it just once


        • Income is king, and you should protect this at all times
        • you may have equity in your home / property that you could release to pay off all your debts
        • remember, home loan interest rates are the cheapest of all loans – if borrow less than 80% of the value of your home, you will attract an interest rate of a minimum 3.2% …. this works out at € 484.68 per month for every € 100,000 borrowed over 25 years ( for this amount, you would need to show an income of c. € 28,570 )
        • Extend the term of your loan if you can – it will reduce your monthly repayment and help the cash flow

You may also be tempted to take out additional monies for investment ( I do think this is a good idea where the return from that investment is greater than the interest rate being paid on the mortgage but you should obtain independent professional financial advice before doing so) Releasing funds to pay off debts as I said, if it can be done should only be done once if at all – sometimes it may be the only option.

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