TAKE CONTROL OF YOUR CREDIT CARD

In Australia credit cards debt peaks in the first quarter each year after Christmas and the January sales which is now.  The statistics show that Australians have somewhere between $36  and $50 billion dollars owing on credit cards where the average interest rate is 18%.

The main issue with credit cards is that the minimum repayments are normally based on 2% to 3% of the balance each month with no fixed term and people get caught up in this wave of never ending debt that over time can build up and spiral out of control.

Did you know that if you owe $5000 on a credit card at 18% interest rate and pay it off over  a 5 year period at $127 per month you will pay $2618 in interest, or $90 per month over 10 years you will pay $5811 in interest. If you refinance your $5000 credit card debt into your home loan at 6% you will pay $30 per month and $5791 in interest over a 30 year period.

If you are one of those people that does not pay off your credit card quickly i.e. each month or quarter then you really need to ask yourself the question – Am I prepared to pay 1.5 to 2 times more for this item?. If the answer is no then these tips to paying off credit card debt may help you.

1.    Stop using your credit card – put it somewhere safe where you can no longer use it and start paying cash for everything.

2.    Make a plan – determine how much you can afford to pay off your credit cards each week, fortnight or month and stick to it.

3.    Pay off the smallest credit card. This will be the quickest way to reach your first goal of paying off a credit card.

4.    Pay off the card with the highest interest rate. Depending on the balance of the credit card this will reduce the interest payable and help you pay off your credit card debt sooner.

5.    Transfer your high interest credit card to a lower interest rate. Many lenders have promotional products for low interest rate cards where the interest rates are reduce for a fixed period e.g. 6 months at a very low interest rate, helping you get stuck into paying off the card sooner by paying less interest.

6.    Make your credit card repayments on time to avoid overdue fees and don’t go over your credit card limit. Fees incurred for poor management of your credit card can cost you up to $40 per month and tarnish your credit record.

7.    If you are struggling and feel like you need further assistance don’t be afraid to ask for help. LoanPort can provide you with an analysis of your credit card situation and help you put a plan in place to manage and eliminate your credit card debt.