Budgeting Credit Card Repayments

When it comes to credit cards, not making repayments is a frustrating and common concern.

One method that can help make repayments a less stressful process is to budget for them every month. We all know that budgets can be used for anything from grocery shopping to saving for a house or holiday, but it can also be a useful tool to help get debt sorted out or simply meet regular expenses like credit card payments.

Regardless of the rate of interest or amount of debt, this method can help make sure credit card payments are met on time every month.

How To Create A Budget

One of the most important things to remember about a budget is the actual goal that is in mind. This could be as simple as “to meet repayments every month” or as involved as “to reduce X amount of debt by this date”.

The key is to make the goal something that is achievable and something that will act as motivation. Once a goal has been outlined, a target savings amount can be determined.

For example, if repayments for a credit card are a minimum of $50 per month, you may want to make the budget $60-$100 per month so that the debt can be paid off more quickly.

From there it is a matter of looking at all the financial factors, including:

• Income
• Living or essential expenses; and
• Luxury or additional regular expenses

These could be considered on a weekly, monthly or yearly basis, so long as the budget amount is calculated at the same rate. The difference between income and all the expenses is what you could currently save, but by looking at every expense in detail more savings may be manageable with a few simple changes.

A good way to start this process is to use a budgeting service like the government’s free Money Smart Budget Planner, which will take you through all of the details mentioned above to help figure out how much can be saved.

The key then is to find a timeline that works for you and adjust the credit card repayments accordingly. Some people may want to work on a yearly basis, and work out how much credit debt and interest will need to be paid off in 12 months, others may want a monthly figure, and some may want to look at a weekly figure. Considering all of these will help put things into perspective as well.

For example, putting $5000 toward credit card payments in a year means paying $416.67 per month, $96.15 per week or $13.67 a day. Once the numbers have been crunched it is just a matter of putting the budget into practise.

With these figures in mind it will be easier to work out what is and is not manageable and whether something like a balance transfer may need to be considered.