The dreaded credit card statements arrive…
Don’t just ignore them or pay off the minimum on your credit card debt.
As this year’s credit card bills bombard your letterbox, take control on managing debt if you’ve maxed out your credit card in the run-up to the festive period or overspent during Christmas.
According to ASIC, the clock is ticking on credit card debt! Their website shows Australians currently owing around $32 billion on credit cards (that’s an average of around $4,300 per cardholder). If you’re looking for methods to reduce your credit card debt post-Christmas, you’re not the only one but you don’t want high-interest rates making your debt even greater!
Whether you just have a few hundred owing on your card or even thousands, there are some simple steps to get you paying off the debt.
1. Stop adding more debt to your credit card
By cutting back expenditure, cancelling or downgrading some services or purchasing cheaper or recycled goods, you can put more money aside to pay off your debt. Also consider selling old or unwanted items to generate extra cash.
2. Pay more than the minimum repayment
Even an extra $50 per month will make a considerable difference.
You should pay more than the minimum repayment amount on your credit card each month or make two minimum payments each month instead of just one. Both strategies help reduce debt faster and curb the interest charged to your card. Work this into a budget by consolidating debts, making additional income or economising on luxuries in your monthly spending.
3. Payday pay-off
Set up a direct debit to pay a fixed amount off your credit card balance each payday. OBT recommends using online banking to organise an automatic transaction to occur each time you get paid, taking money from your everyday savings account and paying off the credit card before you have the chance to spend it.
4. Prioritise cards or payments
If cutting up your cards and consolidating your debt is out of the question, then it makes sense to target payments on one card first by paying off the one with the highest interest rate or tackling the one with the smallest debt. Pay off your cards strategically to reduce the amount of interest charged or the number of repayments.
No matter what option you choose, you should still meet the minimum monthly repayments for the other cards. Interestingly, if you haven’t done your tax yet, do so and any refund can be used to reduce the debt.
And, if asking your credit card issuer for some leeway on having your interest rate reduced just isn’t an option, then do some research. You might actually find that a competitor can offer you a lower rate option, and your current provider might just match the offer.