We Aussies have a crazy amount of credit card debt. It’s quoted at around $50 billion with $32 billion of that collecting monthly interest on it.
So it’s official, we love our credit cards. Stopping the credit card love and reducing debt is hard and takes real commitment.
If you’re ready to bite the bullet and make change, we have 5 steps to help get you on your way:
Step one: Understand your debt
It takes time. You will need your statements. Calculate your annual fees, your interest rates, and your minimum repayment. Learn about how your debt is increasing or decreasing each month. Consider using a website or app for understanding your fees and charges. You can use a bill facility and set up alerts to ensure you are making payments on time alleviating late fees in future.
Step 2: Make a plan
Choose one card to repay first. Work out how long each card will take to repay. The lowest debt may take the least time and give you incentive to continue with the next card once you’ve repaid it. Alternatively you may choose the card with the higher interest rate and decrease your interest charges. Set a goal and work out how to meet the repayments. It’s a good idea to have a chat with your bank and ask them about a lower interest product or if they can help you in any way.
Step 3: Consider balance transfers and consolidating debt.
Many finance providers offer low interest rate offers for a set time period. Balance transfers can be an effective way to repay debt when you can commit to repaying a certain amount each pay cycle. These cards often have high interest rates on purchases and after the low interest period expires, but they’re great if you don’t purchase on them. Make sure you cancel and close all the cards whose balances you transfer across.
Step 4: Spend less.
You need to find money to put towards repaying your credit card debt. To do this you need to spend less. Consider your weekly spend and look for things you can sacrifice to help you meet your goal of repayment. Are there any services you pay for, lunches you buy or trips out that you can eliminate or reduce for a while?
Step 5: Commit to checking in and think long term.
Let’s be honest, it’s easy to spend money! Check in on your spending as often as you need to. Diarise it. If you save extra money by the end of the week, sweep it straight across to your debt. Think about your future and remaining free of credit card debt for life. Should you have a credit card at all? Have you considered a debit card? If you want a credit card, check out the rates and fees available and choose one with a low limit that you can commit to repaying monthly.
Do you have any other tips to add to this list? Please share in the comments below.
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