The following is a guest post. Please see the end of the article for the author bio.
Discover three ways to quickly reduce your credit card debt. Stop panicking and take back some control of your finances by using these three simple tips.
Credit card debt happens very easily even when we are trying to be careful. All it takes is to forget one of two of your credit card purchases over the month, then to be hit by higher then normal outgoings, and the combination can mean you are unable to pay your bill in full. This is where credit card debt begins, and it can creep up from there in no time.
The Reserve Bank estimates that Australians currently have $21 billion in credit card debt to repay, so if you’re one of those people then you at least know you are not alone. However, that is cold comfort in real terms, as it is only your debts that matter to you, not other people’s.
It will obviously be easier for some people to pay off their credit cards than others, because circumstances differ from one person to another, but these are the areas you should be looking into if you want to make some inroads into that debt as quickly as possible:
Reducing your credit card debt
1. As far as possible, stop spending on your credit card: It stands to reason that a credit card debt will never go down if for every dollar you pay off it, you make a purchase to put that dollar back on. You cannot adopt the thinking that says you are so far in debt already that a bit more won’t matter. It will matter, because all these bits mount up over time to make a big problem. You may even want to take the advice to actually cut up your cards and deal in cash and debit cards only. Look to pay down the credit card debt that has the highest interest rate first, and pay as much as you can each month, and never miss a payment unless you want a penalty charge added in as well.
2. Consolidate your credit card debts onto one new card: There are some great introductory balance transfer offers out there, and taking one can really help to ease the pressure. Knowing you have reduced an interest from 15% to 2% for twelve months can make a huge impact financially and psychologically.
3. If you are able to, consolidate your debts into your home loan/mortgage: This should be possible if you owe less than 80% of the total value of your home. Of course, this will mean you end up paying more interest in the long run because your mortgage is for a longer period, but it certainly provides a short-term solution to your credit card debt.
Author Bio:
This is a guest post by Timothy who is a personal finance writer. He specialises in information on how to effectively use balance transfer credit cards and helps people eliminate credit card debt.
{ 5 comments… read them below or add one }
I know it’s so easy to say, but cutting up your credit card and never using one again is the best advice I can give. I just use my debit card now, and if I can’t pay for something I don’t have it.
Yikes, I’m not sure I would ever take an unsecured debt like a credit card, and make it a part of my home loan – a secured debt. No thanks. I’d much prefer to just stop spending on the cards, cut them up, not create any new debt, and pay them off as fast as I possibly can. I also don’t like #3.
I too disagree with #3. The title of the post is “3 Ways to Get Out of Credit Card Debt”. Consolidating the debt into a house mortgage will not get rid of it. Yes, it might make payments more manageable, but I would never recommend putting my home at risk with credit card debt. How about cutting your budget to zilch and taking on a second job?
You may end up paying more in the long run but your short term repayments can be reduced and hence are more manageable.
#3 is tongue in cheek correct? Please tell me you’re joking when you encourage them to take a unsecured debt which (if all else fails) can be easily discharged in bankruptcy and instead pledge their home as collateral for that debt.