Much as everyone likes to pretend they have financial freedom, the truth is modern life would be a lot more difficult if it was not possible to borrow money. Whether it’s a mortgage for your dream home, a loan for your new car or to buy a new sofa, saving up would take a long time and in some cases be almost impossible.
However, the temptation to borrow money to buy things we don’t really need, such as a fabulous pair of shoes or the latest gadget can be hard to resist. And that is why using a credit card for anything other than an emergency is a bad idea.
Here are seven very good reasons why you should pay off your balance….
1) It will keep growing
Even if you don’t spend a single penny more on your credit card, the amount of interest added each month can mean you take one step forward and two steps back. According to the latest statistics from Credit Action, Brits pay a whopping £172 million EVERY DAY in interest payments alone on personal debt. Credit card interest makes up a large proportion of this. Find the best credit card deals here.
2) It could stop you getting approved for credit elsewhere
Lenders look at how much credit you already have before deciding to give you finance. Maxing out your credit card could stop you getting a mortgage or a loan for something essential.
3) You might need it for a real emergency
If your car breaks down or your boiler goes on the blink and you don’t have any savings, you might need to use your credit card. If it is already taken a bashing you won’t have an emergency resource to fall back on.
4) It can tempt you into using it
Having an outstanding balance can make you think that an extra £20 here and there won’t make any difference and that is exactly how balances slowly creep up again.
5) Your lender may suddenly decide to close your account
Credit card providers periodically review their customers and if you have run your account less than ideally and especially if they have tightened up their lending criteria, the lender may decide they don’t want you as a customer any more. If you have gotten used to using your credit card to get by every month, having the facility suddenly withdrawn could leave you with a problem.
6) Having access to ready cash means you are more likely to make an impulse buy
Slapping your credit card across the till makes it easy to buy the absolute MUST-HAVE that you have just spied. However, if you had to save up for it – would you still want it? The chances are that if you were spending cash you had to work hard to save, you would decide that it wasn’t worth the money. Ironically though, when you use a credit card, you are still spending your own money as you have to pay it back… it just doesn’t feel that way at the time.
7) You will be surprised by how much spare cash you have
If you add up all the money you have to pay to creditors every month, it probably comes to quite a lot. Having that cash to yourself could provide you with financial freedom.
How to clear credit card debt
If you have substantial credit card debt, and need help arranging an affordable repayment plan, you could contact a professional debt management company, like Baines and Ernst. They have helped people escape the pressures of debt with affordable debt consolidation repayments through Debt Management Plans – which makes paying off debts much more affordable and less stressful.