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 Aussies by CreditCardFinder.com.au. But despite the fact that many of us are drowning 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 in a bid to banish their debt.
Don’t bury your head in the sand – you can clear your credit card debt for good without tearing your hair out. Jeremy Cabral from CreditCardFinder.com.au shares three steps to clearing your credit card debt for good:
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,” says Mr. Cabral.
CreditCardFinder.com.au is 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.