5 steps to get your credit card debt under control
Has your credit card statement arrived with your Christmas purchases on it?
It can be quite a shock when you finally open the envelope from your bank and notice how much you spent on presents, entertainment and holidays!
Here are 5 things to consider so your credit card debt doesn’t feel like a burden.
1 Find out how much you owe on all your credit cards
Sit down with your credit card statements and write down a summary that includes the:
- Monthly payment
- Balance due
- Credit limit, and
- Due date for each credit card.
This can feel daunting to do, but knowledge is power – you need to know how much credit card debt you’ve got before you can improve your situation.
2 Contact your bank
Interest rates are at record lows in Australia now and banks are keen for your business. Make a call to your bank to see if you can negotiate a lower interest rate.
A lower interest rate will mean that you can pay off your credit card balance quicker.
3 Consolidate your debt
If you’ve got multiple credit cards, you may like to consider consolidating all your debt into a personal loan, into your mortgage or transferring the balances into a lower rate card.
Combining your debt into a personal loan will mean that at the end of the loan period, your debt will be cleared. The interest rate may be around 7 to 14 per cent but this rate will still be lower than your credit card interest rate.
If you combine your credit cards into your mortgage you need to be disciplined about making extra payments each fortnight or month.
Paying the same mortgage amount won’t clear your debt.
Transferring your credit card balances to a lower rate credit card is appealing to some people as some banks offer an interest free term.
To make this option work, it’s important that you take advantage of the interest free period by setting up a repayment plan and sticking to it.
4 Change your spending habits
To change your financial situation, you will need to change the way you spend. Instead of swiping your credit card with purchases, consider taking cash out of your account each week and use this for your daily expenses like grocery shopping and transport costs.
Having to part with a set amount of cash each week can help rein in your spending tendencies.
5 Get some advice
Your credit card debt didn’t just appear overnight – it’s been accumulating over time.
And if you know you’re going to miss a payment, contact your bank and let them know.
If you’re not sure what to do first, it’s a good idea to get some independent financial advice.
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The advice provided in this blog is general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on this advice you should consider the appropriateness of the advice, having regard to your own objectives, financial situation and needs. For our full disclaimer, please click here.