5 tips for those who struggle with credit card debt

What characterizes a reasonable use of credit cards? We provide our five best tips for those who struggle with credit card debt.

It is a well-known phenomenon that credit cards are a payment instrument that provides benefits to those who use it. Credit purchases entitle you to rights in the Financial Agreement Act, and in addition to this you have access to interest-free credit. Many cards on the market also have bonuses, insurance and other benefits. If you pay what you owe in time, these benefits are free to use.

If you however have the habit of postponing your payment for a long time, it can quickly become expensive.

If your personal finances are significantly in the red due to credit card usage, it may be necessary to refinance your credit card debt, but before that time you can take several precautions to prevent the debt from getting bigger.

Extinguishing burning debt

The statistics on Norwegians’ debt ratio show that Norwegians have a total of NOK 90 billion in unsecured debt. Consumer loans account for 45% of consumer debt, while credit cards account for the remaining 55%. The credit card debt is NOK 50 billion according to statistics.

In order to avoid and end up in debt it is important to manage your private economy in the best possible way. Below are five tips for what to do if your credit card usage has spun out of control.

1. Do not spend more money than you possess

Do not use the credit card if you do not know when you can pay the bill. It can quickly become expensive.

Using the credit card when you do not know when you get money can be described as a risk game. Instead of using the credit card to cover daily consumption, you should rather release funds and cut your spending so you can afford to live on the money you earn.

However, if you know that you have the money to pay the credit amount at maturity, or get money in the near future, the situation is different. For example, if you receive money in connection with tax settlement or holiday pay, it may be unproblematic to postpone your payment. But if you do, it’s important to be aware that interest rates start to accrue and your debt becomes more expensive.

2. Find solutions for repayment

In order not to spend more money than you can actually repay, it’s important to know what you spend money on. This gives you a better overview of what you need and what you can do without. If you have high debt that burns, it is important to find solutions for repayment as soon as possible.

The next tip is therefore to write a budget and cut your consumption to the bone until you get up to date. This can be difficult for many, as it may be easier to embrace a higher lifestyle than to reduce it.

You can consider whether you can take an extra job to get funds that you can use to repay your expensive debt. You can also take a round in the loft and in the basement and see if there is anything you can sell to get extra cash. Get rid of unnecessary subscription, and enter a shopping regime where you visit the food store once a week.

3. Do not keep your credit card in your wallet

Avoid falling into temptation to use the credit card by keeping it in a safe place at home, rather than in your wallet.

If you’ve been trading on credit over a long period of time and started losing control of your credit card debt, it’s important to tackle your issues right away.

Dinero.no recommends that as far as possible, credit card usage is limited to cases where there is a reward for doing so. Examples of this may be the purchase of travel on credit cards that include travel insurance or purchases of major electronics and similar purchases, with subsequent discounts and rights on the credit card. However, it is important to transfer the amount from your account as soon as possible so that you do not lose sight. This is especially true if you struggle to make ends meet when your credit card bill ends in your inbox.

4. Multiple Credit Cards = Multiple Bills

If you lose control of your own consumption, it does not take much to you before you end up on the wrong side of the budget. To avoid this, you may do yourself a favour.

Keep only one credit card. In this way, you avoid falling for the temptation to spend more credit cards, which may cause you to lose overview of your debt.

5. The interest rate on credit cards is higher than on other loans

Prioritize repayment of credit card debt, as it is one of the most expensive loans you have.

It will always be appropriate to pay off the most expensive debt you have in order to avoid large interest expenses over a long period of time. Because the credit card rate is often higher than on other loans, you should prioritize to repay your credit card debts first. The nominal interest rate on credit cards can be at 20-30%, unless you have low-interest credit cards.

If you struggle extra financially for a month, a solution may be to delay the payment to the Loan Fund, for example, or pay off on credit card debt if you have student loans. The loan portfolio has significantly lower interest rates than other loans and therefore can withstand being run longer.

5 tips for those who struggle with credit card debt