Credit cards can be a convenient way to make purchases, but unfortunately they are also very good at getting people into trouble.
We all start out with the best intentions with our credit cards. but it’s a fact that many Australians find their balances spiralling out of control with little hope of clearing them any time soon.
Although you may think that clearing your credit card balances is an impossible task, there are a number of achievable steps you can take to reduce your balance and move towards clearing your balance completely.
Use the Right Card
The first step is to make sure you have the right card in place. As you are carrying a balance on your card you are being charged interest on your full balance, which means it is important to have the lowest interest rate possible.
If you have a card with interest free days, or a premium card such as a gold or platinum card, you will most likely be paying a higher interest rate and higher fees than is necessary. You should switch to a low rate card as soon as possible.
Increase Your Payments
Having a low interest rate is great, but to really start reducing your credit card balance you need to start paying over and above the minimum payment.
Minimum payments on credit cards are generally not much higher than the monthly interest charge, so if
you only make the minimum repayment you will not be making much of a difference to your balance.
Adjust Your Limit
As you repay your balance you should lower your credit card limit from time to time. For example when your balance drops below $5,000 you should reduce your limit to $5,000. Then continue doing the same at each $1,000 point until you have reached a manageable limit amount.
If you repay your balance without ever lowering your limit, there is always a risk that you will start building up your balance again and end up back in trouble.
Set a Budget
This is one of the most important pieces of the puzzle, and by setting and sticking to a budget you can help yourself from getting back into credit card debt again in the future.
Most Australians get into credit card debt simply because they spend more than they earn. If this is what’s happening in your case, you need to set a budget to ensure you are spending less than you earn, with any surplus to be directed towards repaying credit cards and other debts.
Clearing your credit card debt won’t be easy, but if you follow these steps and maintain your discipline, you can certainly achieve the goal of having a zero balance on your card.
If you need more help managing your debt, contact DebtFix here, for a free consultation.