How to reduce your credit card debt

7 ways to clear your credit card debt and get your finances in control.

Credit card use has steadily increased in Australia over the last two decades, with more than 16 million cards in circulation and about $32.5 billion worth of national debt currently accruing interest. With an average credit card balance of over $3,149 (on average, $1,933 of which accrues interest), it’s no wonder that debt is a common and significant Australian concern. If you’re looking for ways to reduce your personal debt or avoid it altogether, this guide provides useful tips for doing just that.

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Rates last updated August 24th, 2017
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Name Product Balance transfer rate (p.a.) Purchase rate (p.a.) Annual fee Amount Saved Product Description
St.George Vertigo Platinum
0% p.a. for 20 months
12.74% p.a.
$99 p.a.
Offers complimentary travel insurance, complimentary purchase insurance and access to a 24/7 personal concierge service.
NAB Premium Card - Exclusive Offer
0% p.a. for 24 months
19.74% p.a.
$90 p.a.
Exclusive to finder.com.au, enjoy a no BT fee, long-term balance transfer offer with platinum privileges, including travel insurance.
St.George Vertigo Visa
0% p.a. for 14 months
13.24% p.a.
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Receive up to 55 days interest-free on purchases and the ability to make contactless payments with Visa payWave technology.
Virgin Australia Velocity Flyer Card - Bonus Points Offer
0% p.a. for 18 months
20.74% p.a.
$64 p.a. annual fee for the first year ($129 p.a. thereafter)
Earn up to 60,000 bonus Velocity Points in the first 3 months on eligible spend and enjoy a discounted annual fee of $64 for the first year.
HSBC Platinum Credit Card
0% p.a. for 22 months with 2% balance transfer fee
19.99% p.a.
$99 p.a.
Earn 1 Reward Point per $1 of eligible spend and receive complimentary travel and purchase protection insurances.
Citi Rewards Platinum Credit Card
0% p.a. for 24 months with 1.5% balance transfer fee
20.99% p.a.
$49 p.a. annual fee for the first year ($149 p.a. thereafter)
Apply by 30 September 2017 to receive a long-term BT offer, earn Citi Reward Points and receive complimentary travel insurance.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
0% p.a. for 18 months
20.74% p.a.
$129 p.a.
Earn 3 bonus Velocity Points per $1 for the first 3 months, a first year annual fee refund and a yearly $129 Virgin Australia Gift Voucher.
Bank of Melbourne Vertigo Platinum
0% p.a. for 20 months
12.74% p.a.
$99 p.a.
Get a range of complimentary insurance covers, access to a 24/7 concierge and up to 55 days interest-free on purchases.
ANZ Platinum Credit Card - Exclusive Offer
0% p.a. for 12 months
0% p.a. for 3 months (reverts to 19.74% p.a.)
$0 p.a. annual fee for the first year ($87 p.a. thereafter)
Exclusive to finder, receive 0% p.a. interest on purchases for 3 months and 0% p.a. on balance transfers for 12 months with no balance transfer fee.
Suncorp Clear Options Platinum Credit Card - Exclusive Offer
0% p.a. for 18 months
20.74% p.a.
$99 p.a. annual fee for the first year ($129 p.a. thereafter)
Exclusive to finder, receive a long-term, no fee balance transfer and earn up to 1.25 Suncorp Rewards Points per $1 spent.
Bank of Melbourne Vertigo Visa Credit Card
0% p.a. for 14 months
13.24% p.a.
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Receive up to 55 days interest-free on purchases and the protection of Verified by Visa online purchases.
BankSA Vertigo Visa
0% p.a. for 18 months
13.24% p.a.
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Get up to 55 days interest-free on purchases and be protected by a 24/7 fraud monitoring service.
NAB Low Fee Card
0% p.a. for 16 months with 2% balance transfer fee
19.74% p.a.
$30 p.a.
Receive complimentary purchase protection insurance, special offers from Visa Entertainment and up to 44 days interest-free on purchases.
HSBC Low Rate Credit Card
0% p.a. for 15 months with 2% balance transfer fee
13.25% p.a.
$55 p.a.
Receive up to 55 days interest-free on purchases. Also enjoy exclusive offers with the home&Away Privilege Program.
Woolworths Everyday Platinum Credit Card
0% p.a. for 14 months
19.99% p.a.
$0 p.a. annual fee for the first year ($49 p.a. thereafter)
Receive a $100 eGift Card when you apply by 30 September 2017 and make an eligible purchase by 31 October 2017.
BankSA Vertigo Platinum
0% p.a. for 18 months
12.74% p.a.
$0 p.a. annual fee for the first year ($99 p.a. thereafter)
Take advantage of purchase protection, extended warranty and overseas travel insurance, plus a 24/7 concierge.
American Express Essential®  Credit Card
0% p.a. for 12 months with 1% balance transfer fee
14.99% p.a.
$0 p.a.
Receive a $50 credit when you apply online, are approved and spend $750 on your new card within the first 3 months of card membership.
Virgin Money Low Rate Credit Card
0% p.a. for 12 months
11.99% p.a.
$99 p.a.
Receive up to 44 days interest-free on purchases and the optional insurance coverage of CreditShield Edge.
ANZ Low Rate Platinum
0% p.a. for 16 months with 2% balance transfer fee
11.49% p.a.
$99 p.a.
Enjoy platinum benefits with exclusive discounts, complimentary travel and purchase insurances and a 24/7 personal concierge.

Compare up to 4 providers

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7 ways to clear your credit card debt

If you find yourself burdened with an outstanding credit card balance and mounting interest charges each month, consider the following strategies for clearing your debt. You may also choose to apply a combination of these:

1. Make regular repayments and pay more than the minimum

Create a realistic repayment schedule and stick to it. Making only the minimum repayments on your account will only keep you trapped in debt for a lot longer than is necessary and you’ll pay a lot more interest than you need to. A $2,000 debt at 20% interest with a 2% minimum payment will take you over forty years to repay and cost you over $5,000 in interest if you only ever pay the minimum amount. Add $50 each month and the debt is gone in three years with just $500 worth of interest paid. The smart thing to do is to create a budget for your monthly expenses and calculate exactly how much money you can afford to set aside for repayments each month. Pro tip: setting up an automatic debit to transfer that amount to your credit card account on a recurring date each month will help ensure that you stay on track.

2. Repay the debt with the highest interest rate first

This strategy targets interest reduction so that you’ll end up paying the least amount of interest over the long term. With high credit card interest rates, this could represent significant savings and the interest saved could be used to repay the rest of your debt sooner. Prioritise paying off the account with the highest interest rate first by allocating all available resources to it. Once you’ve paid that account off, close it to avoid further charges and move on to the account with the next highest interest rate.

3. Apply for a credit card with a 0% balance transfer offer

0% balance transfer credit cards let you transfer your existing debt onto a new credit card with the benefit of paying no interest for an introductory period. This results in interest savings for that period, which can help you repay your debt faster. Having one account instead of a few can also mean that you save on account and administrative fees. However, it’s important to repay your balance transfer amount within the introductory period, since the interest rate will typically revert to the higher cash advance interest rate at the end of this period. In order to make sure you repay the full balance within the 0% interest period, divide your debt by the number of 0% months offered by your card and faithfully repay that amount each month. For example, if you have a credit card debt of $3,000 and a 0% balance transfer offer for 12 months, you’d need to allocate $250 each month to clearing the debt before the revert rate applies in the thirteenth month.

4. Consolidate your debt with a personal loan

A personal loan could also prove to be an effective way to consolidate your debt at a lower interest rate. A personal loan can offer substantial savings on your interest payments compared to a credit card. Compared to a balance transfer credit card offer, a personal loan also offers a longer loan term than the balance transfer offer would. When considering a personal loan, factor in related costs such as application or establishment fees or monthly or yearly fees. Also, beware of further spending on your credit card once you’ve reduced your balance to zero with a personal loan.

5. Refinance your home loan

While this may sound drastic, refinancing your home loan can offer with it several perks. Refinancing generally gives you access to lower interest rates when you take on a new lender’s deal and you might be able to find a package with fewer fees and more features too. Carefully weigh up the pros and cons of this option though, because you’ll essentially be moving your credit card debt onto your home loan, which means stretching your debt over more years albeit at a lower interest rate.

6. Discuss your options with your bank

By having a chat with your bank, you may be able to amicably negotiate a more comfortable payment plan. You could be approved for an interest reduction or a short payment hiatus, which could help give you an edge on your repayments.

However, if you’re seriously struggling to make repayments, you may wish to consider a Debt Agreement or Personal Insolvency Agreement, which lets you negotiate a lower repayment amount and new terms with your creditors. Note that these are acts of bankruptcy that will also have their own repercussions on your credit file.

7. Look into financial counselling

Before pressing the big red button, you might like to call for help. Financial counselling does not have to be expensive and you can even receive free help for managing your debts. Obtaining professional financial and legal advice for your personal situation can sometimes be the first step towards debt freedom. You will be given personalised advice on how to consolidate your debts, manage creditors and protect your credit rating.

How to avoid credit card debtcredit-card-application738x185

To prevent falling into debt, the following tips can help you keep your credit card under control:

  • 0% purchase credit card. Get a credit card that offers 0% interest on purchases. This will allow you to make purchases and repay them without accruing any additional interest. This perk usually only lasts for a promotional period of up to 18 months, though, so be aware of the revert rate that applies after that time.
  • Pay more than the minimum. Making only minimum repayments on your credit card balance typically means that you’re only paying 2.5% or $25 of your statement balance, whichever is greater. At that rate, it might take you years to repay even a modest balance. Learn how minimum repayments work and why you should be paying more.
  • Stick to a budget. Create a budget for your expenses each month and schedule a payment plan to have your debts covered. Set up calendar reminders or, better yet, automatic debits to ensure that payments are made regularly.
  • Move your statement due date. By making sure your statement due date is just after payday, you’ll definitely have the funds to repay your credit card bill on time.
  • Identify why you first fell into debt. If you’ve cleared your balance and want to avoid debt in the future, you’ll need to identify why you lost control of your finances in the first place. Was it overspending, high interest rates or a combination of the two? Try working with a budget or get a card with a lower interest rate. If you’re an impulse shopper, leave your credit card at home so you’re not tempted to use it and make sure that you only use it for necessary purchases.
  • Take measures to curb your spending. Creating a monthly budget should help curb expenditure, but you could also consider reducing your card’s credit limit as a stronger preventive for overspending.
  • Stop using your credit cards. If your spending problem requires more than monthly budgeting and occasionally leaving your credit card at home, consider cancelling your cards altogether. prepaid credit cards and cash are surefire ways to avoid debt.

While credit cards can be a convenient way to pay, they make far better slaves than masters. If you have found yourself in credit card debt, follow the necessary steps and seek assistance as soon as possible to regain control of your finances. When considering if a credit card is still the best option for you, compare all your options and be wise about what you need for your own personal circumstances.

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NAB Premium Card - Exclusive Offer
NAB Premium Card - Exclusive Offer

Interest rate

19.74

Annual fee

90
Qantas American Express Ultimate Card
Qantas American Express Ultimate Card

Interest rate

20.74

Annual fee

450
St.George Vertigo Platinum
St.George Vertigo Platinum

Interest rate

12.74

Annual fee

99
NAB Low Rate Credit Card
NAB Low Rate Credit Card

Interest rate

13.99

Annual fee

59

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4 Responses

  1. Default Gravatar
    MargurittaNovember 14, 2014

    I received $500 from my tax return. I do have regular payments into my credit account. I do pay more than my set amount. Or shall I keep it to spend at Christmas instead of putting things on my card/

    • Staff
      ElizabethNovember 17, 2014Staff

      Hi Marguritta,

      Thanks for your question.

      There is no real easy answer as to the best way to pay down your credit card debt. It depends on how much interest you’re currently paying, if you have any other open credit accounts or debts, and as you mentioned, you may be looking at increased expenditure over Christmas.

      You may want to sit down and crunch some numbers as to how much using the $500 will save you in interest repayments, and if it might be better than continuing to make your regular repayments. You can also take a look at this useful guide on reducing your credit card debt.

      I hope this has helped.

      Thanks,

      Elizabeth

  2. Default Gravatar
    SonnyMay 1, 2013

    Hi there, my name is Sonny. I am 457 work visa holder for next four years. my yearly income is $55000 approximately.
    I want to take loan for about $50000, which I want to pay off in five years. I want know which bank would be better for loan and which has low interest rate?
    Thank you.
    Sonny.

    • Staff
      JacobMay 1, 2013Staff

      Hi Sonny. Thanks for your question. If you’re interested in a loan, please refer to our personal loan comparison site, you can compare options for a loan here. Jacob.

Credit Cards Comparison

Rates last updated August 24th, 2017
Name Product Purchase rate (p.a.) Balance transfer rate (p.a.) Annual fee Product Description
NAB Premium Card - Exclusive Offer
19.74% p.a.
0% p.a. for 24 months
$90 p.a.
Exclusive to finder.com.au, enjoy a no BT fee, long-term balance transfer offer with platinum privileges, including travel insurance.
St.George Vertigo Visa
13.24% p.a.
0% p.a. for 14 months
$0 p.a. annual fee for the first year ($55 p.a. thereafter)
Receive up to 55 days interest-free on purchases and the ability to make contactless payments with Visa payWave technology.
Virgin Australia Velocity Flyer Card - Balance Transfer Offer
20.74% p.a.
0% p.a. for 18 months
$129 p.a.
Earn 3 bonus Velocity Points per $1 for the first 3 months, a first year annual fee refund and a yearly $129 Virgin Australia Gift Voucher.
St.George Vertigo Platinum
12.74% p.a.
0% p.a. for 20 months
$99 p.a.
Offers complimentary travel insurance, complimentary purchase insurance and access to a 24/7 personal concierge service.

Compare up to 4 providers

* The credit card offers compared on this page are chosen from a range of credit cards finder.com.au has access to track details from and is not representative of all the products available in the market. Products are displayed in no particular order or ranking. The use of terms 'Best' and 'Top' are not product ratings and are subject to our disclaimer. You should consider seeking independent financial advice and consider your own personal financial circumstances when comparing cards.

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