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How to Avoid the Credit Card Debt Trap

 By Lyn Bell

There is a lot of truth about people ruining their credit score rating due to missed payments and paying their credit card bills late. Fees pile up and interest payments grow, and before you know it its all out of control. After a while you may not even be able to pay the minimum payment amount. 

If you don’t do something fast - it could be the beginning of the end. 

To make sure this don’t happen to you, always pay your bill on time, and always avoid missing a payment. Naturally it is best to pay the account in full each month to avoid interest charges – after all credit cards are normally one of the most expensive means of financing debt because of the high rates charged. 

Sometimes, it can be hard to make your payments on time, although you should always do everything in your power to ensure that you stay on top of things. Below, you’ll find some tips to help you with your credit card payments. 

• Always pay your bill on time. If something comes up and you aren’t able to pay, you’ll be penalized. Late payments mean you will be charged interest for the full month. Although you may think that the reason that has come up will justify a late payment, it doesn’t justify a late payment in the eyes of your credit card company. Pay where and when you are supposed to pay - and do it on time. 

• If you simply aren’t able to pay your entire bill, you shouldn’t worry about it but instead pay the minimum amount. Even though you may be able to pay more at a later date, you should always make sure you pay at least the minimum. You can always add to your minimum amount by making an additional payment later. But beware as you will still be charged interest for the month. 

• The best way is to always have at least the minimum payment amount set aside, so that you have it available when your credit card bill arrives. Prepare a budget and make sure you include the minimum payment for the limit on your credit card. If you are budgeting you should be allowing for payments that you no doubt spend on your credit card i.e. clothing, gifts, entertainment. This way you will have your minimum amount plus your spending amount available as a payment. 

• You could check if your credit card company allows a payment ‘holiday’. This service will allow you to request a waiver regarding your payment when something urgent comes up and you don’t have the money to pay your bill. Make sure that you use this service wisely as there will be a limit to the times you can use it. Ensure that the situation is truly an emergency and there are no other options available for you. This service will normally have a cost as well as interest payments, and you’ll need to pay it the following month. 

Used wisely credit cards can be great for budgeting and deferring loan payment interest but you need to pay it off in full each month to avoid interest charges. 

You should always know what your interest rates are and have a good idea of what your bill is going to be before you make a purchase. So many times, those who have credit cards make purchases, knowing they can’t make the payments - then suffer when they get the bill and aren’t able to pay it. This is called instant gratification and a dangerous way to use a credit card. 

Remember that if you simply aren’t able to make your payment, you should contact your credit card issuer immediately and see if you can work something out. It’s no use burying your head in the sand and hoping it will all go away. 

When you have a credit card, you should always make sure that you have the money to pay the bill, or at least the minimum amount, the minute it arrives. You will normally have a couple of weeks notice before the payment is due – make sure that you do not go over this payment date. This way, you’ll remain in good standing with your company and your credit score will be undamaged.  Back to top

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P O Box 38094, Parklands, Christchurch 8842, New Zealand


As an Authorised Financial Adviser in Christchurch Lyn Bell has passed the requirements of the Financial Markets Authority and is legally qualified to provide financial services to her clients throughout New Zealand.  

Lyn’s registration can be viewed at www.fspr.govt.nz. Lyn can also be found at the Financial Markets Authority website.

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While every care has been taken to supply accurate information, errors and omissions may occur. Accordingly, Lyn Bell & Associates accepts no responsibility for any loss caused as a result of any person relying on the information supplied.