Lower Credit Card Payments

Being in debt can increase your monthly cash outflows. By restructuring your financial obligations in an effort to reduce interest rates and save money, you may be able to obtain monthly lower payments on your credit cards. If successful, you will find that it is easier to juggle multiple bills, which will lessen the chance of incurring late fees or bad credit.

When times are good, you can send extra monthly payments to your bank, credit card issuers or other lenders to cut your debt faster. When times are tight though, it helps to have some flexibility in your budget or to take other steps to lower your monthly credit card payments. There are some methods for accomplishing this feat.

Balance Transfer

One of the quickest ways to cut your monthly outlays is to transfer the balance to a new, lower interest rate credit card. This can help you reduce your monthly payments enough to manage a drop in income or some other temporary situation. There are different types of transfers to explore.

While a permanent interest rate reduction is usually the best choice, those can be hard to achieve and the savings may not be as much. Promotional rates common to super balance transfers often make these solutions worth it, but they also could result in even higher interest rates once the promotional period ends.

So if and when that occurs, a higher interest rate will be passed on to the consumer. This will result in a larger monthly payment on your account. So this super balance transfer strategy only works if it helps you avoid late charges or if it allows you to pay down your balance faster. The reason this approach may work is that if your principal balance is lower, you are still better off even when your interest rate does go back up.

Use a Consolidation Loan

Borrowing money to pay off multiple credit cards is another possibility. There are some pros and cons to this, and be aware of the risks if pursuing this option. But it can definitely help people improve their overall financial situation if done properly.

A new, fixed loan with an interest rate of 9% would be much better than several different credit card payments with rates of 12-25%. The challenge with a bill consolidation loan is that you may already appear to be overwhelmed by debt. Another issue is that many potential borrowers will already have poor credit scores. Therefore a lender may be concerned that you will simply spend the loan proceeds and then charge up your balances even more on your credit cards. It might be too high of a default risk for most banks to take a chance on.

Debt Management Plans

A debt management plan can be a useful alternative for getting lower credit card payments. It is a form of consolidation that is combined with counselling and other support. This is especially helpful if you are already drowning in debt and unlikely to be approved for some form of loan or balance transfer.

When evaluating a debt management plan, or DMP, you should only deal with reputable organisations that are registered with the Financial Conduct Authority. Only these organisations will have your best interests in mind. Other firms may seek to profit from your situation, or may even be outright fraud.

If implemented properly and if the terms are adhered to, then these plans can be a useful tool to a consumer. Many people may be recommended to enroll in such a programme following a budget counselling session. The Citizens Advice Bureau is the best resource for locating a proper charity that can provide you with free counselling. As part of this session with the counsellor, be sue to explore all possible programmes, and look to see if a potential DMP is a good fit for you and your financial situation.

If your counsellor recommends this tool, you could soon be able to achieve savings in your budget from lower interest rates on your various accounts. It can really address any bills that you are behind on, including credit card or even medical debts. Of course if your interest rates or principal balances are reduced, then so will the amount that you need to pay each month.

The process is also simplified for the consumer as well as there will be a single consolidated monthly bank withdrawal to make a consolidated payment. It will also be set up similar to an installment loan, the difference being that your monthly payments are disbursed to your individual credit card and other creditors every month according to the repayment schedule.

There are many other benefits to enrolling into a debt management plan. Among them include your counsellor’s helping you prioritise your bills and any financial commitments you have. They will also support and encourage the clients throughout the entire process.

Do Nothing

In the case of older debts, sometimes the best option is to take no action at all. Did you know that defaulted credit cards may become uncollectible in a few years (5 years in Scotland)? If you are unsure about your rights in relation to an older liability, you may get help from a money advice counsellor.

To locate an approved nonprofit organisation, you should consider calling the Citizens Advice Bureau at 08444 111 444 (England) or 08444 77 20 20 (Wales). In Scotland, call Citizens Advice Scotland at 0845 04 05 06.


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