Here are some tips to help break the cycle
79.6% of Australians lie about their credit card debt to a partner or family member according to a new survey of over 1,000 Australian consumers carried out by CreditCardFinder.com.au. Despite the fact that Australians currently owe close to $50 billion in credit card debt, only 5.5% would ask a family member for help combat this, and just 8% are willing to cut up their card and go cold turkey in a bid to banish their debt.
Consumers are being urged not to bury their head in the sand when it comes to credit card debt and take control of their finances.
Jeremy Cabral, Publisher of leading credit card comparison website, CreditCardFinder.com.au says, “Lying about credit card debt and trying to pretend it’s not an issue will not make it go away. People often worry about debt but don’t take action. What many fail to realize is that there are many options to reduce credit card debt and enable you to feel in control again.”
For those willing to consider options to change their situation, 32.5% of respondents would be prepared to increase their repayments each month in order to reduce debt, while 32.1% said they would rather get a loan and consolidate their debt. Surprisingly, only 21.9% would opt for a balance transfer.
Mr. Cabral has the following tips on how to clear credit card debt effectively and put an end to the lies:
1. Perform a balance transfer
A balance transfer can help you pay less or even 0% interest on your existing credit card debt. This is one of the cheapest forms of debt finance available.
For example if you have a balance of $5,000 with an interest rate of 19% p.a., carrying out a balance transfer to a card with 0% interest for the first 8 months could save you $614.
2. Pay slightly more than the minimum balance each month
The minimum monthly repayments calculated on your credit card are only repaying a small percentage of your balance; the rest is being paid on interest charges. Paying a little extra on repayments can make a huge difference to your credit card debt.
For example, if you have a balance on your credit card of $5,000 with an interest rate of 18.5% p.a. and your monthly repayment is 2.5% of your outstanding balance, you would be paying $127 per month. If you pay the minimum each month you’d pay $10,772 over 12 years and 11 months. However, if you were to pay an extra $50 per month you would pay $6,481 over 3 years and 1 month. This could save you $4,921 and shave 9 years and 10 months off your repayment period.
3. Pay off your credit card each month in full and on time
If you miss a monthly repayment it can cost you hugely in late fees and interest charges. If you don’t make payments on time and in full you will disable the interest free days feature of your card for that statement period.
Put a reminder in your calendar to organize your payments and remind you of when these are due.
“Racking up major debt on your credit card is a serious issue and ignoring this can result in the extortionate accumulation of fees and a bad credit rating. Consider your options and work out the best way to reduce debt. Worrying about it will not solve the problem, it’s easier than you think to take control and get credit card finances in order,” concludes Mr. Cabral.
CreditCardFinder.com.auis a free service which since 2006 has helped over 4.8 million Australians save time and make an informed decision when comparing credit cards issued by Australian banks and credit unions.