Identifying a way to eliminate credit card debt is essential. Revolving debt on charge cards is one of the most expensive and destructive forms of credit available. The term is not defined so it can potentially continue for decades. Debt problems are further exacerbated by the fact that so many people only make the minimum monthly payment. A 0% balance transfer credit card can help.
Eliminate Credit Card Debt
Olinka Koster stated in The Mail Online that "Those paying off the average credit card debt of £1,384 at two per cent a month will pay a total of £4,213 over 30 years and 11 months - longer than the average mortgage."
Credit Card Debt Problems and the Minimum Monthly Payment
Prolonging the length of time debt is repaid over is an intentional money making tactic of financial institutions. The problem appears to relate to the way cards are regulated as current rules appear to encourage the borrower to make the minimum monthly payment.
Simeon Linstead of uSwitch.com stated that: "The Banking Code states that minimum repayments should cover at least the interest charged each month, but this doesn't go far enough to protect consumers from a debt sentence that exceeds the length of the average mortgage of 25 years."
Competition amongst financial institutions for business has created an opportunity for those with unpaid debt. A number of 0% balance transfer credit card are currently available which allows customers to save a substantial sum of money each year.
Eliminate Credit Card Debt with a 0% Balance Transfer Credit Card
Transferring a balance helps with debt clearance because a higher percentage of money goes towards clearing the money owed - not just interest. For example, a £5000 charge card debt at 18% APR means that the customer is charged £900 interest. This money will now be used to help clear debt.
A New 0% Balance Transfer Credit Card Every 12 Months
Provided that the borrower has good credit, it is possible to perform a transfer every 12 months to eliminate credit card debt. It is also important to do the following:
- Ensure that the previous cards are closed as there will be a strong temptation to spend more money. Leaving the previous card active may exacerbate financial problems.
- Reduce the credit limit once a quarter on the new card so that the balance doesn't start to increase again. It is important to see regular progress with any form of debt reduction strategy.
A 0% balance transfer credit card is an excellent way to eliminate credit card debt without negatively affecting a credit rating. Should the borrower debt-to-income ratio be unsustainably high, it is possible to address this problem through a Debt Management Plan or debt settlement program.
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