Feeling slightly bloated after the holidays? And no, we’re not only referring to your waistband – your credit card debt has probably swollen too.
Latest data shows we now have close to $49 billion in credit card debt, $34 billion of which is accruing interest charges.
Now is as good a time as any to start detoxing your finances, and money expert Alex Parsons, CEO of Australia’s leading financial comparison site RateCity, has put together five easy steps on how to get rid of that excessive debt you’ve accumulated.
1) Ramp up repayments
If the festive season has hurt your back pocket, the number one way to get back in the black on your credit card is to pay debt off faster. Most credit cards have a minimum monthly repayment of 2 percent of the outstanding balance. By increasing that to 4 percent per month, you could save thousands of dollars over time.
2) Get switching
The average personal credit card interest rate is around 17 percent, which is more than six times the Reserve Bank’s cash rate! But if you shop around, you’ll see that you don’t have to pay exorbitant rates for plastic. RateCity lists credit cards with ongoing rates from 8.99 percent, as well as several 0% introductory rate offers for up to 12 months.
3) Avoid the traps
If used correctly, a balance transfer credit card can be a good way to get back on track with your debts. But there is no magic in these cards – they can’t make your debt disappear! You still owe the same amount of money and if you don’t repay the balance during the honeymoon period, you may be hit with a higher rate of interest after the initial period – balance transfer revert rates can range to over 20 percent.
4) Streamline money chores
To take the stress out of scheduling bills and loan repayments – and to ensure you never miss a payment again – consider organising payments from your regular bank account. It’s a great way to avoid late payment fees.
5) Consolidate and save
Credit cards can be a really useful tool if you can set, and stick to, personal spending limits – and pay the debt off in full every month to avoid paying interest. But if you’re unable to manage this, a personal loan could be a more suitable option, particularly for big ticket items. The time and paperwork involved in applying for a loan makes impulse buys less likely, and while you won’t get the benefit of interest-free days, the rates can be lower than for credit cards.
Find great rates for personal loans, credit cards, car insurance and more at RateCity.com.au