There was a time when we used to joke about the fact that there’s too much month at the end of our money. But this is no longer just a funny thing we say when we can’t afford that extra bag of chips with our groceries. Since the 2020 Covid-19 pandemic, we’ve all struggled a bit more to manage our finances and it’s become somewhat inevitable that people are turning on their credit cards more and more in order to make ends meet.

The way we’re relying so heavily on our credit cards now, it doesn’t even feel like we’re getting into debt. It just feels normal to use up our income and then carry on spending on our credit cards.

But there comes a time when using your credit card in this way won’t help you, and the debt you’re building up could end up hurting you financially.

What is too much credit card debt?

We’d love to give you a proper figure, like R63 000, but ultimately, too much credit card debt depends entirely on the cardholder and their financial situation. What might be a lot to you, might be a fairly average monthly spend for someone else – to an amount that’s completely repayable.

The thing is, when we think about debt, we tend to assume that any number is too much. Most of us make the mistake of assuming that zero debt is heaps better than having any debt at all. So, maybe you’ll be surprised to learn that it can be to your benefit to have at least a small, regular revolving balance.

In other words, it can be good for those that hand out credit (issuers and lenders) to see you responsibly manage the use of your credit card and tend to your debt obligations.

Why credit card debt matters

Make no mistake, paying off your debts is a good decision to make. Credit cards can be among the most expensive types of debt to keep. Depending on who you get your credit card from, you could be paying the highest interest rates around and carrying large balances can hurt your credit score. 

However, a credit card is also a viable way to build a good credit history, which you need to do things like take out a home loan. Without any credit history or being able to show any balances carried out with responsible payment behaviour, lenders could view it as a signal that you’re too risky to lend money to.

Smart ways to pay off your credit card debt 

It might be temping to use your savings, if you have these kinds of reserves tucked away, to knock off your credit card debt. After all, there’s a certain appeal to just getting it over and done with in one blow. But in reality, this isn’t the best use of your resources – and thankfully, it’s not your only option.

So, before the costs and interest starts to rack up, we urge you to consider all the payment strategies available to you, and then stick to the option that works for you.

For example, you could use the ‘avalanche method.’ This is a great way to climb out of your debt situation and it involves making a monthly minimum payment on all of your accounts and then putting as much as you can afford into the account with the highest interest rate. Once this account is paid off, you move onto the account with next highest interest rate.

Another approach is the ‘snowball method.’ With this plan you make the minimum monthly payment towards all of your accounts and then pay as much money as possible into the account with the smallest balance. Once this debt is paid off, you can target the next account with the next smallest balance.

There are several payment strategies which you can explore, and while we won’t continue to go through them all, we’ll leave you with the personal loan option. This is a popular choice for good reason, because it allows you to get out of debt much faster, can give you a lower interest rate by replacing your credit card debt with a personal loan, enabling you to consolidate your payments into a single stream, and even boost your credit score.

Personal loans are an unsecured borrowing option with lower interest rates than credit cards. They are useful for large purchases or consolidating debt. To get the best deal, shop around for the best rates and lenders. Apply through AA Money for trusted loan comparisons.