Are you struggling to pay off one or more credit cards? High interest rates, fees and penalties can sometimes make credit card debt seem never-ending, even if you stop using the card, but there are always options.
Read these 7 tips to help you pay off your plastic and break the debt cycle sooner.
1. Create a budget
Having a clear idea of where your money's going can help you to cut out the less necessary expenses so you'll have more money left over each month.
This could help you to cover your credit card repayments as well as make sure you have enough money for essential purchases, so you won't have to keep relying on your credit card and make your debt worse.
2. Make more than the minimum repayment
If you're only paying the minimum payment on your cards each month, your credit card debt will take longer to pay off and will be larger, because of interest. If you're only paying back 2% to 3% of the balance, this might only cover the interest added and not the existing debt.
If you can comfortably afford to pay more than the minimum, your debt could be shifted much sooner and you'll pay less overall.
3. Pay off the highest interest card first
If you're paying off multiple cards, you can save money in the long term by prioritising payments on the card with the highest interest rate or fees. It's still important to meet your monthly repayments on all cards, or you could face penalties.
Once you've paid off a card, consider closing that account so you won't be tempted to use it again.
4. Use your savings
Trying to save while you're paying off debts could mean you're losing money if the interest you're paying on credit cards is higher than what you're earning in your savings account.
While it's recommended that you have enough savings to cover several months of expenses in case an emergency happens, paying off debts should be prioritised before focusing on long-term savings.
5. Use balance transfers
If you're eligible for a balance transfer credit card, you could lower your repayments by moving your debt into a new card with a lower rate.
However, these cards may revert to a high interest rate after the introductory period is over – so if you're still in debt by that time, you could end up paying more.
6. Consolidate your debt with a loan
An alternative to balance transfers is a debt consolidation loan. This can absorb multiple debts including credit cards and loans into a single monthly repayment with a more affordable payment amount or interest rate.
A financial advisor can let you know if you're eligible for a consolidation loan or other options.
7. Ask for help
You don't have to struggle with credit card debt alone. If you're experiencing financial hardship, credit card companies are obligated to consider requests for assistance, although this may not always be granted. You can also talk to a financial advisor for confidential, obligation-free advice about how to get out of debt.