Credit cards are one of the leading causes of financial stress and hardship for many Australians.
According to the Australian Securities and Investments Commission, Australians owe about $32 billion on their credit cards, which equates to about $4,300 per card holder.
As such, the average card holder is paying approximately $700 in interest every year, based on an interest rate between 15% and 20%.
If you own multiple credit cards, and have a personal loan and/or a mortgage, managing your debt can become a difficult task.
One of the ways you can sort out your debts is by consolidating the money you owe on your credit card/s.
This essentially means bringing your debt together and setting up a regular prepayment plan to pay it all off more easily and quickly.
There are three ways you can pay off your credit card debt faster:
Consolidate credit card debts onto your mortgage
You can sort out your credit card debt by merging it with your mortgage, so you only have one monthly repayment rather than several. You may also be able to save some money, as your home loan interest rate is likely to be significantly lower than your credit card interest rate. However, if you do consolidate your credit card debt into your mortgage, it is important to note that this debt will be stretched over the life of your loan, so you should always aim to pay your debt off as early and quickly as possible. Where possible, make additional repayments to help pay down your debt in a timely manner.
Transfer balances onto a low rate credit card
With different interest rates and statement due dates to consider, juggling balances on several credit card accounts can be difficult. Moreover, it can make you feel as though you are in a never-ending debt spiral that is impossible to escape. If your credit cards and credit card debt is getting out of hand, you may wish to consider a balance transfer. A balance transfer allows you to combine all your credit card debts onto another credit card. Better yet, many lenders offer low or 0% interest rates during the introductory periods, which can help you to reduce your interest charges and allow you to repay your debt faster. It is important to note however, that any balance remaining at the end of the introductory period will be charged interest at the standard variable rate for that card.
Cancel your credit cards
Finally, one of the best ways to manage your credit card debt moving forward is by canceling them altogether. It may sound extreme, but cancelling your credit cards will ensure you don't get weighed down by excessive debt of this sort ever again. By getting rid of your credit cards, you will be forced to use your debit cards instead. This ensures you only spend money you have and don't waste your time and money buying things you simply cannot afford.
Of course, before you decide to head down the debt consolidation path, it pays to speak with a professional. Your local Mortgage Choice broker can help you choose the right debt management method for your situation.