In the UK today, one of the most worrying types of debt is credit card. On average interest rates on credit cards stand at approximately 17 – 18%.  This means, if you only make the minimum payment each month, your credit card debt will will soon grow very quickly.  On top of that there are charges and fees if you miss, or are late with payments.

If your based in the UK and find yourself unable to make more than the minimum payment each month you should take action and try not to ignore the situation. One of the options available is a debt management plan.  This type of plan is an informal agreement with your lenders that results in your repayments will be brought down to a more affordable level.  You will pay back as much as you can afford towards your debts on a monthly basis. Your lenders aren`t obliged to accept your offer of a debt management plan, but if they realise its the most realistic way for them to get back their money, they will usually choose to proceed.

Your lenders may also agree to a freeze the interest and fees, which stops your debts from getting bigger while you`re paying them back. As a result your debts can be cleared quicker than if you were still paying interest.  You should be aware that repaying a debt more slowly will affect your credit rating, whether or not you enter a debt management plan.

If you have unmanageable credit card debt, a debt management plan can help make your credit card debt, affordable.  You should draw up an income/expenditure list so that your repayments can be made to fit around all your other everyday costs.  Your lenders will only accept a debt management plan if you can show them that your existing debt repayments are unaffordable, but that you can still repay the debt in full.

In conclusion you have a lot to think about when entering a debt management plan.  Its informal, meaning that your lenders can choose to cancel it at any time.  It will affect your credit rating, meaning it will be close to impossible to get any type if credit in the UK for years to come.  It can also be a means of sorting out your debt without going down the IVA or bankruptcy route

We all carry credit cards. Well most of us anyway. For those fortunate enough to live without credit cards my hat is off to you. In today’s consumer society using credit cards to help make ends meet is almost a necessity of living.

We use them whenever necessary but do we really understand their function, terms and responsibilities?

In its purest form a credit card functions as a source of disposable income that allows one to purchase whatever they wish, whenever they wish. Within established limits that make up the card. Even if they don’t have the money in the Bank to cover the purchase at the time.  Each credit card comes with its own unique set of terms and conditions.This is where very few of us actually understand the power behind the credit card.

Did you read all that fine print hidden within the credit card statement and agreement? I bet you didn’t. I know I didn’t and very few people actually do read the agreements.

Without reading the agreements how can you fully understand your rights when it comes to credit card usage?

Or better yet what about the rights of the credit card company in the event that you fail to keep up with the terms of the card.

For instance, how much interest can the card company legally charge you on your purchases and when can that interest be levied?

Where you aware that the APR (annual percentage rate) assigned to your card can be adjusted in certain circumstances?

Do you know what rewards are associated with your credit card? Most credit cards have some form of reward system attached to the card. Why? The credit card business is a very competitive business and card issuing companies continue to increase the incentives for you to choose their card over the competitions.

Do you know how the minimum payment is calculated on your outstanding balance? Different cards can use different methods of calculating the interest owed on the card. Minimum payments are designed to pay off the credit card within a specified period of time.

Of course the card companies prefer you to keep an outstanding balance on the card as they make a whole bunch of money from the interest they charge you.

Some good rules to follow when dealing with credit cards are:

Never overspend to the point where you have no available credit left on the card.

Always pay more than the required minimum payment.

Always make you payment on time to avoid being charged extra interest.

Whenever possible pay the balance in full to avoid interest costs.

Use your credit card to take advantage of valuable incentive points associated with your card.

Remember credit is still a privilege – not a right! Abuse your credit and you will lose it.

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