Credit card debt is quite possibly the worst kind of debt that you can carry
Credit card debt: thee words no one likes to utter.
And it’s not even a good type of debt. At least with a mortgage, there’s light at the end of the tunnel. When you make your last repayment, you own a home. Credit card debt is filthy.
Only loan sharks charge higher rates of interest - just - and it’s all too easy to spend what you’ve paid off the card in the previous month. Many of us have credit card debt, and many of us carry this debt like the proverbial ball and chain. It can weigh you down. Take the bolt cutters to the ball and chain and free yourself from the weight of credit card debt.
Here’s five tips to help you on the way:
Make a commitment
Frugal is the new black.
First things first, make a commitment to paying off your card(s). This will mean a few sacrifices and becoming the embodiment of frugal. Tighten the belt. It may mean a few months of saying no to a night out, or dinner plans, but in the end you won’t be burdened by always having a credit card debt hanging over your head - in the end, it’s worth it.
0% p.a. for 14 months on balance transfers
Pay $0 annual fee for the first year
Offer ends 20 September 2017
Eligibility criteria, terms and conditions, fees and charges apply
St.George Credit Card Offer
The St.George Vertigo Visa will give you a highly competitive purchase rate and a long-term promotional rate on balance transfers. This card also offers an annual fee waiver in the first year.
- $0 p.a. annual fee for the first year ($55 p.a. thereafter).
- 13.24% p.a. on purchases
- Cash advance rate of 21.49% p.a.
- Up to 55 days interest free
Consider a balance transfer
Why should you give your bank your hard earned money?
Once you’ve made a commitment to paying down the balance of your card(s), it’s time to organise your finances. A budget will come soon, but before you budget consider a balance transfer. A balance transfer is a great way to cut down the extra cash you have to fork out each month in interest repayments. There are some great offers out there at the moment, so take advantage of them. This will mean opening up a new credit card with a new bank, but there’s no loyalty in banking anymore, right?
To give you an idea of the type of cash a balance transfer can save you, if you’re currently getting charged 20% on a $5,000 balance, transferring this debt over to a card with a 0% for 12 months balance transfer promotional offer will save you approximately $800. This is money you would have had to pay to the bank in interest. Not bad, aye?
You can compare balance transfer credit cards in the table below.
Come up with a budget
Plan, save, repay, repeat
Once you have an idea of how much your credit card repayments are going to be each month, it’s time to come up with a budget.
While you’re in ‘credit card debt reduction mode’, your discretionary income should be mainly used to pay down the balance of your card(s). That’s not to say you shouldn’t keep a few dollars aside (after you pay your bills and buy the necessities) for yourself, but remember what we said about becoming the embodiment of frugal? Any spare cash you have on hand should go towards your cards. The more you pay off your credit card(s) now, the less you will have to pay later.
Remember the saying, ‘a stitch in time saves nine’?
Empty your savings
Say sayonara to your ‘rainy day’ savings
Following on from the last point, apply all your extra cash to the cards. This includes any money you have in savings accounts.
Rule of thumb: you will pay more on credit card interest repayments than the return you get from any savings account in the market. So it’s logical to move the cash from your savings and dump it on your card.
It might be a good idea to leave a little in your savings account for an emergency, you don’t want to have to use the card(s) again if you can help it. But be prepared to say sayonara to the cash you had sitting around for a ‘rainy day’ or a holiday.
Pay the bills off one at a time
Start high then go low
This tip applies to people who have more than one credit card with a balance on it. It’s safe to assume that there’s a few people in this situation out there. To attack your credit card debt, pay the balance which attracts the highest rate of interest first, this balance will cost you the most in interest repayments - makes sense, right?
While you’re working at paying this balance down, make the minimum repayments on the other balances. When you’ve paid down the first debt, then move onto the balance which attracts the next highest rate of interest and so on.
Following these simple tips can help you get out of your financial rut in almost no time. Just remember to stick to your budget and your commitment to being debt free.