With spring upon us and summer only two months away, a number of credit card holders will have maximised the credit limits on their credit cards - some with little thought of how they are going to address that debt going forward.

The thought of that debt for some is a dread too far – head in the sand stuff.

Many years ago, marketing campaigns urged us all to use our flexible friend - the credit card - when shopping. That friend has, for some, got out of control and some of us need to smell the roses and drink a dose of reality.

As Christopher Parker said, "Procrastination is like a credit card – it's a lot of fun until you get the bill!" Here are 5 tips from John Lowe of MoneyDoctors.ie to put you back on track in 2022 before you splash out in the summer…

1. Don't put the blindfold on when your monthly bill comes in

  • We spend over €2.2b at Christmas time alone on credit cards – that’s only three months ago.
  • Half of us only pay the minimum monthly requirement – at some of the rates the credit card companies charge, it would take 20 years to pay off the credit card debt if only making those minimum payments.
  • Lowest credit card interest rate is 13.8% from AIB Bank Click Card (online).

2. Pay off your credit card bill in full if you can

  • There are so many options to pay off your bill rather than leave debt at expensive interest rates.
  • You are still availing of free credit (from the time you buy something to the time you receive the credit card bill) and are given so many days to pay off.
  • Longest free credit period? Some store cards will allow you 56 days to pay your bill (but then if you don't, you are charged considerably higher interest rates).

3. If you cannot pay off the card debt immediately, transfer your card balance to another credit card provider offering 0%

  • Avail of the 0% rate for a fixed period of time (Permanent TSB give the first 6 months at 0% while Bank of Ireland offer 7 months at 0%. The best is An Post Money who offer 0% for 12 months on balance transfers). This at least buys time while you consider how you are going to dispose of the debt.
  • Ideally you could divide the debt by six, seven or 12 equal instalments so that at the end of the period, your credit card is clear. Paying off last year’s summer holiday via your credit card does not make sense.

4. Look at personal loan options (unsecured loans)

  • The best loan rates you will find are with your friendly local credit union – as low as 6.5%..
  1. You MUST either be living locally or working locally to the credit union.
  2. Most require that you are a member for at least a month before applying for the loan.
  3. Normally for the first loan, you would have to lodge up to 25% of the amount you wish to borrow ... e.g. you want €4,000, you would have to lodge €1,000 into an account. Some of the credit unions (they are all independent) have reduced this to only 2.5%.
  • Bank Of Ireland at 12.8% and AIB Bank also at 12.38% (loans up to €9,999 – their overdraft rate is 11.85%) are expensive.

5. If your loan repayments exceed your income, consolidate if you can and if you are let, but do it just once

  • Income is king, and you should protect this at all times – do a budget and ensure you live within your means.. i.e. your expenditure should not exceed your income.
  • You may have equity in your home / property that you could release to pay off all your debts if you have the income and the lender agrees – some will allow their own credit card debt to be consolidated.
  • Remember, home loan interest rates are the cheapest of all loans - if borrowing less than 60% of the value of your home, you will attract cheap interest rates… some of the fixed rates are extremely attractive, e.g. 1.95% fixed for 5 years. Don’t be afraid to switch.
  • You may also be tempted to take out additional monies for investment (remember if you want growth you must take a little risk but perhaps using the home could be considered a bad idea in light of what has happened over the last 20 years). Very few lenders are doing this and only in exceptional circumstances. Releasing funds to pay off debts as I said, should never be done especially if it is only for lifestyle purposes.

Happy finances to you all and best wishes for the rest of 2022.

For more information click on John Lowe's profile above or on his website.

The views expressed here are those of the author and do not represent or reflect the views of RTÉ.