Well it's January 18, and many of you, if you haven't already, will soon be receiving those credit card bills from the past holiday shopping. For a few there will be no surprises because you set your holiday budget and did not yield to the temptation to overspend.... Bravo. For those of you who were not so disciplined may we suggest that you sit down before you open them.

Unfortunately, it does not matter if it is the holidays or any other time of the year, as a society, we have become far too caught up in what economists describe as "the culture of consumerism" or to put into Bahamian terms: "we like tings too much!" In the past, parents would admonish their children to beware of the desire to "keep up with the Joneses." Sadly, we have lost sight of this excellent advice. Today we are far too eager to satisfy our material desires immediately.

We submit that certain kinds of debt may be appropriate. Most people need to borrow money to be able to buy a home. Some need to borrow money to buy a car. But credit is often used to buy consumer goods and luxuries, leaving little to show for it except the bills. Many people try to buy more – and more often – than they need. Sadly, banks and businesses encourage it.

Do you know for instance that if during the holidays you charged say $2,500.00 on a credit card that charges 17 percent interest, and if you then decide to pay only the two percent minimum required each month, the actual cost of this would be $7,733.00 and it will take you a little over 30 years to pay off the balance. Your interest payments alone will be roughly $5,200.00.

If you had decided instead to invest that $2,500.00 in a mutual fund that earned six percent annually for 15 years you will end up with about $6,000.00. Keep the money invested for another 15 years, and you're looking at a tidy sum of more than $14,000.00.

Credit cards are a great way to make purchases and to track your spending. However, far too many Bahamians see their credit limit not as the maximum amount of debt they can go into, but as an account full of money that they can spend. As the year progresses, why not make a resolution to become debt smart.

Self Assessment

The first step to overcoming a credit card debt problem is recognizing it. Making a decision to take control of your credit card debt is a very important first step. Next, you have to implement the necessary steps to make it a reality. We have provided a couple of pointers to help you on your journey to credit card freedom.

Use your credit cards wisely

Given the ease of obtaining credit cards in the Bahamas many of us usually have more than two or three. Ideally, you really need only one. So, if you have more than two we would definitely suggest cutting up the balance. Choose the ones with the lowest interest rates and put the scissors to the rest.

Pay your credit card bills on time. Credit card interest can range anywhere from 14 – 18 percent. So if you can afford to always pay more than the minimum payment do so.

If possible, pay off your balance in full each month. If this is not possible, then make as large a payment as you can comfortably afford. Paying off or paying down your balance is a sound financial move – one that will save you money on interest charges.

Be wary of credit card partner programmes. Credit Cards that partner with airlines in their mileage programme have annual fees. You also need to charge enough to get a ticket within three years, as the miles usually expire in that time frame.

Cash Advances can cost you. Taking out a cash advance is very tempting. There are hidden costs involved like cash advance fees, interest accrues from day one and there is no grace period. The interest rates are usually higher as well for cash advances

If you can't pay off your balance in full, then slow down on your credit card use. Take time to step back and have a careful look at how much you earn and how much you spend each month. A little budgeting can save you big money down the road.

Check your statement carefully each month. Review your statement carefully. Do all the charges look correct? Have all the payments you made been recorded? Are there any unusual or unexpected charges? Your credit card company will correct legitimate errors, but only if you bring them to their attention in a timely manner before you pay your bill.

Transfer your balance to a card with a lower interest rate. If you have two or more credit cards with outstanding balances, consider moving the outstanding balances to the card with the lowest interest rate. You will save money each month and simplify your record keeping by receiving only one bill.

Negotiate for a lower rate with your credit card company. If you are a good client at your bank, you are a valuable asset to them. Call them and seek ways to lower your interest rate. This is often possible, but never advertised. If the interest rate you are currently paying is very high, imply that you may cancel the card and go with a competitor unless they adjust your rate downward. It doesn't hurt to ask, and you may be surprised at the results.

As always if you need help always seek the advice of a professional. Remember that you are in charge of your financial destiny. You must resist the temptation to overspend and subsequently increasing your debt levels. Your future financial freedom depends on it. It may take a while as you retrain yourself away from your bad habits of the past, but keep focused on the long-term rewards: a life free of bill-juggling, and a financial future that's more secure for you and your family.

Comments and questions are welcomed call us at 502-7010 or email:info@colinafinancial.