CU deal that tries to wean credit card addicts off habit
Published 14/01/2010 | 05:00
HAVE you paid for Christmas with a plastic card and now find that your have a bulging bill to pay?
Well, you are not alone. Over the past few years most of us have been on a debt binge with our credit cards, to such an extent that we owe a staggering €2.9bn on our cards.
The amount owed is changing very little even though people have been attempting to pay off their credit card bills lately.
High interest rates and penalty charges are making it difficult for card holders to get the overall amount owed down, although there are signs lately that consumers are beginning to get to grips with their mountain of credit card debt.
However, people still owe huge amounts of money on their cards.
If you have racked up enormous debts on your credit card, now might be the time to tackle them.
The best advice is to always pay off as much as you can afford.
You would be wise not to miss any repayments and stop using your card again, until the balance is paid off.
It is worth remembering that by just making minimum payments it would take an incredible 20 years to clear your credit-card bill.
One good way to pummel you plastic debt is to join a credit union and sign up for one of their credit card, debt-busting deals.
A number of credit unions throughout the country now offer credit card elimination or repayment initiatives, according to Kevin Johnson who is chief executive of the Credit Union Development Association (CUDA), a representative body for some of the larger credit unions in the State.
These aim to reduce and eventually clear credit card debt through a series of personal loan payments.
However, to avail of this unique facility the consumers must agree to halt any activity on their credit card.
Mr Johnson points out that use of a credit card is habitual and the credit unions offering this service have found that if people can break the spending splurge habit, they are less likely to run up huge credit card debts again in the future.
The schemes generally work as follows: The member agrees to cease using their credit card and applies for a sufficiently large loan to clear off the credit card in full.
That loan is drawn down in three equal instalments over four months, with the first issued as a cheque paid to the credit card company.
The member then pays the interest on the credit card for the next two months, and presents the two credit card statements to the credit union showing that they haven't used it in the meantime.
A further cheque for the second payment is then made out to the credit card company.
The exercise is repeated for the next two months at the end of which the final cheque is issued to the credit card company which will clear the remaining balance.
Members are also strongly encouraged to have their names removed from the credit card providers' marketing listing, to avoid further temptation in the future, Mr Johnson said. "While the system isn't foolproof, it does acknowledge the habitual nature of our spending and effectively treats it as an addiction that need to be broken," the CUDA boss added.
Many people throughout the country have suffered a very difficult year financially and for many 2010 will be a year of readjustment.
People need to look at their current financial situation and readjust their lifestyle accordingly, Mr Johnson added.
For many, this will mean the end of credit cards and store card -- for now anyway.
It's important that people enter into 2010 with a clear understanding of where they are financially and what they need to do to get to their desired level -- whether it's clearly off debt or saving for the future -- or both, the credit union boss added.