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Restrict credit card debt with “the Island Approach”

A novel technique labelled “The Island Approach” is offering a promising new approach for anyone facing seemingly insurmountable credit card debts. And it is coming at just the right time, too: For years, UK citizens could safely assume that credit card debts were the “privilege” of their American counterparts. Today, with six million credit card holders across the country in debt, things no longer look quite that bright anymore.

The term “Island approach to credit card debt” was coined by well-known specialist credit card resource “Card Hub” in a recently published article and is based on the concept of compartmentalisation. Essentially, the approach assigns a single credit card to each category of your purchases. Which means that, for example, you’ll be carrying a credit card for everyday items like food and clothes, a credit card for business expenses and so forth. By treating these different categories as separate entities, the island approach to credit card debt achieves three significant benefits:

• It minimises the portion of payments consumed by finance charge. After all, if the credit card you’re using for business expenses is carrying debt, but you’re debt-free on the card used for daily purchases, your overall interest payments are reduced compared to a situation where both charges are on the same card.

• It ensures fiscal predictability for those with credit card debts. This is mainly of interest to US citizens, where credit card companies can, almost instantaneously, considerably increase interest rates on credit card debt. But even in the UK, the increased transparency of the Island approach makes it easier to determine and analyse your exact credit card debt.

• Since it isolates the precise areas where credit card debt is created, the Island approach trains those with credit card debts to spend within their means.

Of course, the island approach will not eliminate credit card debt overnight. But it does offer a welcome addition to the catalogue of potential measures for those with credit card debt. As Craig Gedey, Marketing Manager at Debt Advisory Line put it: “Tackling your credit card debt always begins with obtaining a precise overview of just how much debt you have and identifying the exact structure of the debt. The Island approach to credit card debt is not a panacea, but definitely a useful tool in this regard. It can be considered a first step towards debt consolidation, which should then be complemented by advice from a professional debt management company.”

For more details, visit the credit card debt section of our website or call us on 0800 157 7254.