Tag: budget

Five Strategies to Manage Credit Card Debt Amidst Covid-19

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We are essentially one year since Covid-19 has utterly transformed our lives. From our constrained day-to-day routines to the way that we interact with others, we are all trying our best to retain a sense of normalcy during these uncertain times.

One area of our lives which may not seem normal is our finances. Whether you have lost your job or are struggling to pay your bills, you may have taken on credit card debt to get through this global pandemic. While it’s unclear when the pandemic will end, there are several strategies you can take today to manage your credit card debt.

Strategy One: Consolidate Your Debt

Debt consolidation can be an attractive option to manage your credit card debt. If you haven’t yet heard of debt consolidation, it is essentially taking a high-interest credit card (or credit cards) and combining your debt into one lower payment. Not only are you paying a lower interest rate, but you are paying only one credit card bill per month. In exchange,

You can leverage debt consolidation by either taking on a debt consolidation loan or by rolling over your credit card balance onto a 0% interest credit card. This strategy is more suited for individuals who have significant amounts of credit card debt, rather than those with more minimal debt.

Crucially, however, consolidating your debt may result in a longer repayment period. You may have a smaller month-to-month payment, but you may be paying more in the long run. Keep this in mind as you are considering this strategy.

Strategy Two: Try to Pay More Than Your Minimum Payment

While it may seem simple, this is an outstanding strategy to minimize your credit card debt. Credit card companies want you to pay the minimum amount on your credit card statement (which is typically 2-3% of the overall balance). However, by paying this minimum balance, you are actually paying more later. This is because interest accrues on the remaining balance. The more you have on your balance, the more interest that you will need to pay.

Because of this, you should think hard about paying more than your credit card’s minimum payment. That said, there’s a fine line between paying more than your minimum and also having free cash to spend on other daily necessities. While you will need to make that determination yourself, paying more than your minimum credit card payment can save you money in the long run.

Strategy Three: Prioritize Your Debts

Prioritizing your debts can help you save some much-needed cash. The core of this strategy is looking at your credit card balances and focusing on paying off the card with the highest interest rate. This is a simple, yet effective strategy. Higher interest rate credit cards will cost you more in the long run, so you should pay off those bills first (ideally, more than your minimum payment).

You can also prioritize paying off a credit card with the lowest balance. This can remove one balance so that you can focus on your other balances. In the end, these are two ways that prioritizing your debts can help you obtain financial relief.

Strategy Four: Become a Great Budgeter

Part of getting into credit card debt is spending money that you may not necessarily have. Because of this, one natural way to manage your credit card debt is to impose spending discipline.

This can be especially difficult amidst Covid-19. While your income may have substantially decreased, your expenses may have remained the same. As hard as it may be, see if you can cut out any extraneous expenses. You may need to make some sacrifices right now. But by doing so, you will use that cash to pay off your credit card debt. Before you know it, you will be debt-free and will be able to adopt your old lifestyle.

Strategy Five: Contact Your Creditors

This strategy may seem a bit unconventional, but it has worked in the past. If you have excessive credit card debt that you’re struggling to pay off, don’t hesitate to contact your creditors. The natural place to start is your credit card company. Do some research on their website and see if they have any type of hardship program. That hardship program may have already existed before Covid-19 or the company may have implemented a new program due to the pandemic. Check out your options and see if you are eligible for these types of programs.

If that fails, don’t hesitate to pick up the phone and directly contact your creditor. Explain your current situation and share your track record of consistent payments (if you have one). By doing this, you may find a hardship program that substantially eases your financial pressure.

Relief on the Horizon

As you can see, there are several different options that can help you manage your credit card debt. While each of these options can provide real relief, you need to determine the best option (or options) for you. From there, aggressively pursue those options. By being bold and aggressive, you will get that much closer to relieving your financial pressure.

 

Smart Money Moves for a Financially Healthy 2020

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Planning to set your financial goals right at the beginning of the year is a great way to start in 2020.

Review your financial position, check where your money goes, review your debt, cut down on extra expenses and plan efficiently. This will help you stay on savings course and prevents you from getting into any money hurdles.

Here are a few ways to help you do that:

1: Revisit your mortgage loans.

Home loans are one of the biggest financial responsibilities that require regular revisits. Look for better options to save your money or get other benefits when there is a change in your financial situations, bank’s loan terms or interest rates.

Check if refinancing can help you save money. Compare your loan interest rates with the current rates because even half of a percentage point drop will give you substantial savings.

Lower interest rates help in reducing your mortgage term because here you can raise your monthly payments and prepare to clear the loan early. For example, paying off the loan in 10 years instead of 20 years offers great savings incentive to the homebuyer.

2.  Get a personal loan

A personal loan is a viable money-saving solution in many situations when you borrow it for the right reasons. With personal loans, you can settle higher interest loans, create a good credit score, pay off credit cards or consolidate debts with more manageable fixed EMIs.

For instance, when you want to consolidate debts on your different credit cards, taking a personal loan can help pay off all the charges in one monthly payment. You benefit from lower loan interest rate compared to the annual percentage rates (APRs) on your credit cards.

However, before taking a loan, calculate your repayment capacity using an online app, select repayment tenure that is within your reach and carefully review all the fine print.

3.  Select the right credit card

A properly selected card can help you make savings on purchases, but the choice of the card should be based on your use and habits.

For instance, a frequent traveler will make savings when his card offers discounts and rewards on air tickets, hotels or lounge access.

The choice of the card also depends on whether you carry a balance each month or pay off dues before time. When you take forward a balance on credit, select a card that has a low annual percentage rate (APR).

Knowing your credit scores always helps you to apply for a card that is more likely to get approved. Lastly, compare the annual savings you make on the card against the card’s annual fee to see if it is right for you.

4. Find a balance transfer scheme

A balance transfer can help you make substantial money savings. Transferring high-interest debt from credit cards or loan to a card with a lower interest rate gives saving on interest and helps in clearing off the debt faster.

However, check if any balance transfer fee is levied to carry the balance to your new card. Another critical factor is the new card APR rate; check the introductory APR offer and price after the promotional period ends.

Always evaluate the terms carefully and put a debt repayment plan in place. Remember your debt doesn’t disappear when you do a balance transfer, but effective planning can help make good money savings.

5. Work out your monthly budget

Make a note of your cash flows to curb all unnecessary spending. Different apps come as a handy tool to do all the calculations for you.

Feed-in your monthly income and your expenses and the app will give you a clear picture of how to plan yourself well.

These tools help you consolidate all your bills, track the spending pattern and get an alert message when the due date of any statement is nearby to avoid late fees. Money management is a vital step to rein spending and get finances under control.

6. Review your subscriptions

If you are a Netflix and Amazon Prime addict, ask yourself if you need all these subscriptions and if you have the time to watch them?

Most people pay more on subscribing too many services but hardly use that entertainment and reading channels they have.

It’s the time to evaluate the spare time you have at hand to use these services and the cost you are spending monthly on subscribing to these. This helps you track the service you can do without and make money savings.

Besides entertainment, your current telephone and mobile plan also needs to be reviewed. Check your bills to study your usage patterns. If you are not using the full service, try considering another package. And if you are paying extra after the service amount, see if you can sign up to a new scheme that serves best to your needs.