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2007
How to get yourself out of credit card debt
Saturday February 28, 2009
Credit cards are marvelous things...but too tempting for many of us. Essentially a bank is giving us the money to buy items we need (or want) to live the life we want. Lovely, until the bank wants it money back, plus interest. It seems many of us only see the first part of the definition of a credit card and not the fine print regarding interest rates and payment, leading to Australia's abysmal personal credit card debt, currently resting at about an annual $8.7 billion.
If you are not in the credit card world yet and looking to choose a card, choose carefully. Look at the different terms and conditions to see what suits you. For example, start with what you can honestly pay back on a month-by-month basis as choose a limit to suit. Also look at the payment methods and choose between interest free periods or a general lower interest rate. Compare credit cards to choose which would suit you best.
If you don't think you can pay off your items within the interest free period consistently than it would be best to choose the lower interest rate credit cards. Alternatively, if you pay your debts quickly than the interest free periods credit cards would be ideal, just make sure you pay in time!
If you are one of the lucky millions that are already in credit card debt there are measures you can take to get yourself out of it.
Firstly, it would be wise to use your savings account to pay off your credit card debt due to the different rates attached. It is far smarter to pay off an account that is charging you 16% interest than save in an account that rewards you with 5%.
Secondly, you really should reduce your limit and pay more than the minimum balance where possible. Typically speaking, the minimum balance is far less than what credit card holders should be paying back, sometimes it really only covers the interest! Most banks require a minimum balance payback of 5% of your owning balance, which is not enough to get you out of debt.
Finally, if you credit card debt is really getting out of control than drastic measures may be required...cut up your card and eliminate the possibility of more charges.
Other worthy options are to consolidate your credit card debt and only have one credit card to simplify the process and make repayments easier for you to understand and make.
Alternatively, use a pre-paid or debit card instead of your credit card. It is using your own money and will limit those ';necessary' purchases.
