If you have found your self looking for a way to get out of credit card debt or more importantly avoid it altogether then these strategies could help you.
We propose the following methods to lose all of your debts on your credit card:
- Regularly pay more than the minimum
- Repay the highest interest debt first
- 0% balance transfer credit cards
- Credit Card debt consolidation
- Refinance your home loan
- Talk to your bank
- Financial counselling
We will explain these in more detail in this article below.
Regularly Pay More than the Minimum
Ideally you should create a realistic repayment schedule and stick to it, using your monthly budget to calculate exactly how much you can afford to pay each month.
While you are only making the minimum repayment necessary on your accounts will keep you spinning on the wheel of debt longer and evitability you will pay more interest, often more than the original debt was worth!
Tip: setting up an automatic transfer to the credit card each month will help you stay on track.
Repay the Highest Interest Debt First
Using this strategy, you target the debt that charges the highest interest, reducing the amount of interest paid long term.
Given the high credit card interest rates this method could represent significant savings and those savings can then be used to repay any other outstanding debts.
By allocating any available resources to paying the debt from your credit card with the highest interest should be a priority, once you have paid the highest credit card debt, cancel the card to avoid your future self using it to make new charges, and move onto the next highest interest rate credit card.
0% Balance Transfer Credit Cards
Consider transferring your existing credit card debt to a new credit card to take advantage of the no interest introductory period.
You can repay your debt faster if you are not paying interest on that debt, and you may be able to (if you have more than one credit card) combine the debt onto the one new credit card having only the one account to pay could also save you administration fees.
As the interest rate will typically revert to the higher cash advance interest rat at the end of the introductory period, it is important to repay the balance transfer amount within that period.
To ensure you pay off the debt divide your debt by the number of interest free months then consistently pay that amount.
Credit Card Debt Consolidation
Applying for a personal loan is an effective way to consolidate the debt from your credit card, at a lower interest rate, which in turn you save you substantially in interest compared to credit card interest.
As a personal loan also offers a longer term for repayments it could be a smarter option than a credit card transfer, especially if you have more than one credit card debt to repay.
While this option sounds great you should factor in any related costs such as an application and or establishment fees, or any on going monthly or yearly fees.
To avoid getting further in debt it would be wise to cancel all credit cards when you have a personal loan.
Refinance your Home Loan
As drastic as this may sound by refinancing your home loan it can offer a number of perks!
Generally, when refinancing with new lenders deal you have access to not only a lower interest rate but you are likely to find a package with fewer fees and maybe better or more features.
This option should be considered carefully as you are essentially adding your credit card debt to you home loan, albeit at a lower interest rate, and extending the repayments over more years.
Talk to your Bank about Credit Card Debt
Make an appointment and talk to your bank, you could be able to negotiate a more manageable repayment plan.
There are a few things the bank can help with if you are approved such as an interest reduction or repayment “holiday” which can give you a reprieve to get you back on track with your repayments.
If you are seriously struggling to make repayments on your credit card debt, you could consider entering into Personal Insolvency Agreements or Debt Agreements, these let you negotiate new terms with your creditors in an attempt to repay the debts.
Note: Debt Agreements or Personal Insolvency Agreements are acts of bankruptcy and will have repercussions on your credit file and should not be taken lightly.
Financial Counselling – Credit Card Debt
Financial counselling doesn’t have to be expense in fact you can find a number of institutions offering fee assistance for managing your debts using Google!
Sometime the first step to freedom from credit card debt is seeking professional and or legal advise for your situation, getting personalised advise could be the answer to your question of how to get rid of all your credit card debt.