Recovery from Credit Card Debt and Loan

According to the New York Times, Britons owe a total of £72.5bn on credit cards with £400m added to balances in November alone, new figures show. Each household in the UK now has an average of £2,688 unpaid on credit cards, one of the most expensive means of borrowing, as experts warned more and more families were being left with unmanageable piles of debt. While the rate of debt growth has slowed, there was still an annual increase of 7.9 per cent – despite fears of economic turmoil in the coming months due to a potential no-deal Brexit.

These is highly prevalent among People with low incomes or living in poverty, who primarily attraction wih the credit cards, because of their appealing nature portrayed by their marketers and their ease of availability, as report by David Steele ,who works with a debt management company

What is a credit card?

A credit card is a plastic card that you can use to pay for goods or services or to get money from a cash machine. Credit cards are issued by banks, finance companies, and some stores, charities and clubs. You can use the card wherever it is accepted and shops and suppliers usually display a sign telling you which cards they take.

Most debt Advisors urge credit card users, to be very cautious with them, though their usefulness are un-marched. Increased borrowing can be expensive in the long run, and also carries with it, the risk of being stuck with debt over a long period of time. Sometimes your card provider will offer to increase your credit limit, especially if you have a good history of payments to pay back.

There are exceptions though, in which some creditors will charge you interest immediately you use your card, for payment. The only guaranteed, on -spot interest charge will be, if you withdraw cash, from an ATM machine

Late payments usually attract extra charges plus intrests.These extra charges will vary from lender to lender, but shouldn’t exceed the 12 Euro set limit. If you miss payments, you'll get late payment charges on top of the interest. These should be no more than £12 for each missed payment.

Applying for a credit card

There are multiple ways on how you could apply for a credit card:

1. Through a creditors website
2. You can request it through mail
3. You could call and enquire from a credit company
4. You could apply directly to a bank

After applying for the card, the creditor should send you forms either through mail, or online, that you will be expected to fill in.He will use the information recorded, to check your own credit record, most likely with, the aid of a credit reference agency. After checking and verifying, then it’s only then, that he will judge your credit worth and also your limit

When you fill in the application form for a credit card, be careful to make sure all the information you put is correct. If you are not sure about how to complete the form, ask the credit card provider for help. You will have to sign the form to say all the information is correct and any false information you give may be seen as fraud.

Checklist of what to look out for when choosing a credit card

Here’s a checklist of some things to look at when you choose a credit card:

• Annual Percentage Rate (APR). –These generally are the total cost of the balance on the card, if you’re not able to pay off the full amount monthly.You are supposed to compare different credit cards offered by different lenders. You should also consider other associated costs, such as the fees, charges and incentives offered
• minimum repayment.-This is the least payment /,a minimum amount you will be required to make to our servicing of the credit. Usually it ranges between 5% of the balance, or 5euros of the total balance
• annual fee.-different lenders will sometimes charge an annual cost for the use of card.This fee, is usually added to the balance due, and if you can’t pay it fully,then it can gain intrests
• charges.-some cards charge extra fee,for going over the limit,for swapping outside the UK,Or even late repayments. You need to thoroughly counter-check on the credit agreement
• introductory interest rates. This is where you start off paying a low rate of interest or none at all. The rate then increases after a certain amount of time. For example, it could increase after six months or from a certain date. You’ll often see an introductory rate for balance transfers. If you are comparing cards, look at how long the introductory rate lasts as well as the interest rate it changes to at the end of the introductory period
• Loyalty rewards-These are points gained, on the virtues of total amount spent. You can use them to buy goods or acquire services. The key point to look for, is to assess whether you can use the services, as they are only offered in selected shops
• cash back-it’s only those who pay the full amount owed, monthly that qualify for this. Your money may get refunded to your card, depending on your history. Some lending companies, offer lower interests on your card.

Signing a credit agreement

If your application is accepted you will be asked to sign a credit agreement. This is a legal document which sets out what you and the provider are agreeing to. The credit agreement includes details such as how much you can borrow, how much and when to repay, the interest rate and charges that can be added, your rights and responsibilities under the agreement and any other conditions that apply to it. Always try to read the small print so you know exactly what you are agreeing to.

How much you can spend

The maximum amount of cash that you can spend, on your card is known as CREDIT LIMIT. This limit usually depends on a number of things,ie:your total financial income, your daily spends, assets worth, etc. Different creditors have different criteria, but they all revolve on same factors. Each time, you swap,tap,or generally purchase an item, using your credit card, the amount is calculated and topped up in your account. This amount is usually known as the Balance.

Some cards are aimed at people with a poor credit history and have a low limit of £200 or so. Often these cards have a high interest rate, but if you pay them back on time, they can be a good way to boost your credit rating by showing other creditors that you can be trusted. Other cards have a much higher limit which can go into the thousands. Whether you have a low or high credit limit, it's very easy to run up affordable debts which will take a long time to pay back. Sometimes your card provider will offer to increase your credit limit, especially if you have a good history of payments to pay back.

Interest free period

Most of the credit companies, will give you a grace period of some days, before charging interests on the credits card.These days may vary from 20 to a maximum of two months. This grace period is also known as the Interest free period. If you are unable to make the full payments by then, your interests will come into effect and will be added with the total amount owed

The type of card and your credit rating will play a big role in choosing the best interest that you are going to be charged. Some cards are usually charged with interests of even less than 10%, while others can be slapped with as high as 70%

Some cards offer a special deal where you are not charged interest even if you do not pay the balance off in full. The credit agreement tells you what rate of interest is being charged and when it will be added to your account. There are exceptions though, in which some creditors will charge you interest immediately you use your card, for payment. The only guaranteed, on -spot interest charged is usually from using the ATM or other cash withdrawal methods. Late payments usually attract extra charges plus intrests.These extra charges will vary from lender to lender, but shouldn’t exceed the 12 Euro set limit. If you miss payments, you'll get late payment charges on top of the interest. These should be no more than £12 for each missed payment

Taking Advantage of the Intrest Free Period?

How to take advantage of the interest-free period

• Ensure you credit is paid, fully by the end of each month
• Make sure you fully pay your closing balance by end-,month
• Use your diary, reminders on your phone or you could subscribe to.the auto-payment ,to ensure you don’t default in paying
• Strategize on your purchase,ie:you could buy large, high valued assets at the beginning of the your statement. This will should provide you ample time to repay your credit on time

Your statement

Your lender should send you your card statement monthly. In the statement, you should be able to clearly understand the following:

• Clearly and understandable records of how you spent your credit
• Clear details on the interests charged, and other charges if any that you may have incurred during transactions
• The full amount of your balance, from your given card limit
• The deadline by which, all the payments should have to be made
• The minimum amount your required to pay
• The channels, location and procedure for making the payments
• If in doubt, how you could contact the lender

It’s important to check your statement carefully to make sure it is correct and tell your provider straight away if you think there is anything wrong with it.

Ways to repay your credit card debt sooner

Consolidate your debt with a balance transfer

One option for borrowers with existing credit card debt is to move it to a 0% balance transfer credit card. These cards offer a period in which no interest will be charged on that debt, meaning that every penny of your repayments goes directly towards reducing the size of your original debt. (This assumes you’re not using the card for new purchases - it’s usually best to have another card for this.) You will usually need to pay a fee to transfer your debt over, usually around 3% of the balance transferred (subject to a minimum fee level), so if your outstanding balance is £1,000 it could cost you £30 to switch.

These cards are usually only an option if you have a good credit rating. If you’re not eligible for a 0% deal, look for a card with as low a rate as possible (and ideally one that will not charge a fee). But remember to look at the balance transfer interest rate, not the APR (as that is based solely on purchases)

Pay more than the minimum payments

Minimum monthly repayments tend to be set at very low levels, sometimes as low as 2% . If you only make the minimum repayment your debt could take decades to pay off and in that time you could pay thousands of pounds in interest.

Aim to pay off the entire bill each month so that you will not pay any interest at all. With a standard credit card, if you always pay off your monthly bill in full, you can enjoy between 45 and 59 days of interest-free credit. If that’s not possible, pay off as much as you can and work out a repayment plan. Don’t use the cards for cash withdrawals

Pay off the highest rate of interest first

Prioritise repaying your debts from the highest rate of interest and allocate repayments to them first. You can close each credit card account after you have repaid the balance in full to avoid any further charges. Make sure you continue paying at least the minimum payment on each card. Otherwise missed payments will lead to extra fees and could damage your credit rating, making it more difficult to get credit in future. If you have debt secured against your house or on rent and utility bills, make sure you pay these first, as the consequences of not paying can be much worse. Reduce your credit limit

Minimum monthly repayments tend to be set at very low levels, sometimes as low as 2% . Though this may sound manageable, you shouldn’t rush to make the decision. Basically you will end up taking such a long time servicing your credit, on top of which, the interest gained/accumulated will be astronomical and could end up, punishing you in the future financially.

Your priority should be set at completing your monthly payments, so as you could avoid any addition cost in terms of intrests.if you keep up with this, you may be eligible for the 49 and 59 interest free days. Please note that this is not the case with all the credit companies, and you need to counter-check with yours.

If you’re in a deep dire situation, and the above solutions can’t work out for you, then you need to payback as much as you can humanly afford, at your own pace using a repayment plan. You should also strictly avoid using the card for cash withdrawal, as this attracts more interests

Budget

Putting a budget in place allows you to take control of your money. It’s a record of the money you have coming in and what you have left to spend each month. Once you’ve done this you should be able to identify areas where you can reduce your spending. The money that you save can then be put towards repaying your credit card debt.

Negotiate with your provider

If you're having real difficulties and are experiencing temporary hardship in repaying your outstanding balance, then contact your provider to renegotiate your payment plan.

Pay by Direct Debit

Setting up a Direct Debit for your credit card payments will ensure you never forget to pay. It also means that you will not be charged a late payment fee, or risk losing the benefit of a 0% introductory rate. Set up a Direct Debit now, preferably to pay the full amount every month automatically. If you can’t afford this, pay as much as you can – card companies have to let you set up an automated payment for any amount you choose.

Get help from a financial counselor

These should actually be your one of your first steps. Financial counselors, who are qualified, could always provide you, with the different options you may have, how your situation could improve, advise on government assistance, assist in managing your personal finances, and also guide you in other debt recovery options. You also won’t need to pay a penny, as most of them offer these services for free. Your financial councilor could also contact the credit company on your behalf, explain your situation and come up with an amicable agreement that would be beneficial to both of you.