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Collins Home Loans Blog

4 tips to reducing credit card debt

Posted by Jodie Henderson on Mar 9, 2017 2:58:04 PM

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In the aftermath of Christmas and the holiday season, the reality of spending up big on credit cards can be an unwelcome surprise as it appears as debt on the January statement. And we all know that credit card debt which goes unmanaged turns into bad debt. This type of debt can become debilitating and stop you from purchasing an appreciating asset and building wealth moving forward.

The Reserve Bank of Australia recently published figures that revealed that Australians spent $27.5 billion on credit cards for purchases and cash-out transactions in December 2016. And 3.2 billion of this was is estimated to have been spent of Christmas presents alone.

CEO of Debt Assist Relief, Nicole Crosisca, says that up to 40% of credit card holders fail to resolve their credit card debt on a monthly basis. “So if the idea of paying off your Christmas credit card debt is unlikely in the near future, then you will need some strategies for the medium to long term” she says.

Whilst these numbers are concerning, if reducing and managing your credit card debt is a priority for 2017, you may want to follow these handy tips from Debt Assist Relief CEO, Nicole Crosisca.

Tip 1. Switch to a lower interest rate cards. Transferring your credit card balance to a card with a lower interest rate could provide you with a buffer and assist you to pay your credit card debt off sooner. Some transfers can even incorporate a period of no interest at all. You can then utilise this to your advantage by trying to pay more monies towards the credit card each month as a way to reduce the balance quicker.  It is important to read the fine print though, as many of these low interest / no interest cards revert to a higher rate after a period of time.

Tip 2. If you have multiple cards, consider paying off the ones with higher interest first and then cancel the other cards over a period of time. As you clear the debt on each card, you will need to contact each provider one at a time. It is important to close each account properly, as you may still incur fees, even if you no longer use the card.

It is worth noting that, in some cases, provders may make it difficult for you to close your account completely so be prepared to be persistant. If you decide to keep one credit card for emergencies and online payments, a good idea is to lower the credit limit on that card so as to reduce tempatation.

Tip 3. Build up your savings by reducing your discretionary spending:-

  • Have a coffee habit? Buy less take away coffees - two coffees at $4 a day equals $2900 a year for example.
  • Review your TV subscriptions - Nexflix, Foxtel
  • Unsubscribe from online shopping emails - to reduce temptation. What you don’t see you don’t buy.

Tip 4. Don’t tackle your credit card debt alone. Having someone to talk to who understands your situation, can really help.

If you are struggling with credit card or personal debt, contact Debt Relief Assist for an confidential, obligation-free Debt Review.

Topics: Debt management, credit card debt, debt consolidatoin