Credit card debt: Schreditcard to the rescue
For Australians, and indeed the World as a whole, Credit card debt is a more serious problem than ever before. Too often we will decide to make minimum payments, keep spending and forget the mounting debt – an action that suits the lender and harms the borrower most of all. The main obstacle seems to be a lack of funds with which to get proactive and eliminate this debt – coupled with ongoing spending. Schreditcard offers a new solution: no big change in habits, big change in credit card balance. Money Buddy finds out more.
Schreditcard: Beat credit card debt
So how does Schreditcard work? It's not magic, but instead a fairly simple solution. Founder Peter Kates said, "Consumers would normally pay their credit card when the statement tells them because that is the way we are all conditioned. Most cardholders pay the minimum amount and reason with themselves that they will magically find extra funds next month to pay a large chunk of debt. However with only one in four credit card holders actively paying off debt we need a new look at this problem". The logic is sound – we all take credit card debt lightly on the whole; society tends to treat ongoing debt as an acceptable norm today, rather than an unwelcome hindrance in need of immediate fix – but how does Schreditcard work?
Schreditcard puts forward a fairly basic, but highly effective, notion – that consumers can have their entire salary paid to their credit card. This allows left over cash, after regular monthly expenses, to push down the outstanding balance and reduce damaging interest fees. The Schreditcard idea also proposes that Interest be paid to positive ("in the black") credit card balances, and advocates greater access to funds for minimal fees.
Clearing credit card debt: The bottom line
Ultimately, ongoing credit card debt comes down to a lack of responsible spending by the credit card holder, since the lender is not going to manage debt for them. In fact, credit card late fees are a financial institution's core source of income. Mr. Kates added, "I think minimum repayments should be banned, it is only in the banks' interest to have this arrangement. In fact, all credit card statements should show the result of minimum repayments displayed as a graph".
Indeed it is true that paying off the minimum on your credit card balance is damaging long term and only serves to put money in the banks' coffers. That's a fact that everyone with a credit card should know; there's no excuse in the Internet age for not being informed. More importantly, it should be a priority, rather than a preference, to clear debt.
Sadly no financial institution to date will support the Schreditcard idea enough to adopt salary credit as an option. In the meantime, therefore, responsibility remains solely on the shoulders of the credit card holder, meaning that spending within means should be a target. The only question remaining is – what will you do to clear your credit card debt?