If you don’t cut credit card debt each month by paying off your full balance, chances are that you’re getting hit with huge charges.
Depending on what type of card you have, annual interest rates can be anything from around 21 per cent – for no-fee cards that come with rewards – to 8 per cent for supposedly low-fee cards.
Sure, having the ability to buy what you want, when you want is handy. Thanks to the internet and your credit card, your wildest consumer dreams are only a click away. But it’s something that comes at a heavy cost. A bargain isn’t a bargain once you add on exorbitant credit-card interest charges.
There’s never a wrong time to cut credit costs and here’s how to start.
Tips for an interest-free future:
- Use your savings
If you’ve any savings or investments, it’s unlikely you’re getting a return as high as the interest rate your card provider is charging. So use your savings to cancel your debt.
- Switch cards
Many cards offer interest-free periods for balance transfers. Switch your balance to one offering a 0 per cent grace period, and use that time to get serious about reducing your debt. Or, if reducing your debt to zero within the interest-free period isn’t an option, choose a card with the lowest yearly interest rate instead.
- Consolidate
With home-loan interest rates at an all-time low, it has never been a better time to consolidate your debts into one, manageable sum. Talk to your trusted Mortgage Broker and they’ll be happy to organise finance that will pay off your debit, adding the sum to your home loan. It’s a simple process that could potentially save you thousands of dollars.
And once you’ve paid off your credit card debt, keep it off. Debt is like a diet, you’ve got to work at keeping the numbers off:
- Debit not credit
Keep your credit card tucked away at home, for use only in emergencies. Use a debit card for all other purchases. Move direct debits from your credit card to your current account. This way, you’ll avoid bill shock at the end of the month and limit yourself to spending only the cash in your bank account.
- Learn to save
If you want to make a big purchase, set up a savings plan and stick to it. If your hot-water heater packs up, it needs to be replaced immediately. The latest TV, you can live without until you’ve saved the required moolah.
- Resist temptation
Easy credit – it’s a like a drug: you get an instant high from your purchase, followed by a nasty comedown when you get the bill. Think before you waste your money on unwarranted purchases, and learn to just say no!
