Top Tips for Reducing Credit Card Debt

May 03, 2017
Hayley Dunning

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Australians currently have more than $32 billion worth of credit card debt, according to recent data from the Australian Securities and Investment Commission (ASIC).

Credit cards aren’t inherently bad. If you take a structured, disciplined approach to paying off your cards and use them wisely, they can be a great tool with lots of added perks.

The problems arise when people have very little knowledge of how to manage their funds and use their credit card or cards regularly without plans or consequence in mind. Are you simply making the minimum repayment on your credit card each month? If the answer is yes, you could find yourself trapped in a vicious cycle of debt that seems impossible to get out of.

You need to be accountable and prepared to accept that you’ve gone down the wrong path. Throw away your excuses!

First of all, you need to make a plan. You need clear goals on how you plan to minimise your debt. Simply announcing that you’re going to pay off your debt will achieve nothing. Set small steps with small achievable goals.

If you have a couple of different credit cards, try paying off the smallest debt first.

Of course, paying off debt (particularly credit card debt) is often easier said than done.

If you find yourself unable to pay off your credit card debt in full each month, try living by these simple rules:

Live off cash. This will ensure you only spend as much as you can afford and ultimately avoid spending money on frivolous items. All the extra cash you have left over should them be put towards paying down your debt.

Start paying off more than the minimum repayments. If you cannot afford to pay off your credit card in full each month, make sure you pay off more than the suggested minimum amount. This will ensure you pay down your debt faster and don’t fall victim to simply paying the interest you owe on the debt, rather than the debt you have accrued.

Only buy things you can afford - sounds obvious but is it a philosophy you live by?

Set yourself a budget and review it regularly. A good budget should include all your regular incomings (wage) and outgoings (bills, rent or mortgage repayments, groceries, various every-day living expenses etc).

By following these simple steps, you should start to see light at the end of the debt tunnel you currently find yourself in.

If, even with these steps, you simply can’t seem to stay on top of your credit card debt, pay off your current bill and then cancel the card.

Sometimes, the best way to avoid temptation is by removing it from your life.

If you'd like to speak to a broker about consolidating your debt or how your debt may impact your eligibility for a home loan, call us today on 07 3211 7744.

Posted in: Financial planning

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