Australians love their credit cards owing around $45 billion on plastic, accordingto the Reserve Bank. That is around $3,139 per cardholder and while it may not seemtoo excessive, as most people soon discover getting rid of debt is not easy.Paying off just the minimum monthly re-payment will only prolong the agony.Switching to a zero or low interest rate card may seem like the answer but only ifyou are willing to be committed.So just how can you get that over-spending under control, improve your life and say goodbye to that credit card hangover forever?
1. TIME TO GET SERIOUS
It is possible that you may not even know how much you owe on plastic, especially ifyou have more than one credit card. And you are probably just as unaware how muchinterest you are paying on those figures. If you are avoiding calls from the bank,then you are entering scary credit card territory. Admitting to the problem is thefirst step to financial freedom. Be honest and confront those statements head-on.Look at what is the biggest culprit adding to your financial woes. If you are beingslugged automatic payments for driving on the tollway then its time to battle peakhour traffic again. Or if it is online shopping doing the damage, pin your creditcard statement near your computer.Analysing your spending habits should highlight possible savings.
2. CONSOLIDATE THE DEBT
Putting your debts together on a zero or low interest credit card can offer somerelief. But you need to read the fine print with some cards reverting to the cashadvance rate as soon as the honeymoon period is over. Reward cards may be temptingbut at this point the most attractive feature should be avoiding annual fees and knocking off the balance.Cliff Mearns, chief executive officer of Credit Counsellors Australasia,receives pleas for help every day from people battling to control their finances. This ranges from the young families to the multi-million dollarbusinessman. He believes low rate cards can offer a short-term solution if theright product is chosen. "Why pay interest when you do not have to," Means says."But people will apply for them who can not pay them back in six months, justlike interest free furniture or electronics and it can become a trap." There isplenty of websites comparing the benefits of balance transfer credit cards,meaning there is no excuse for not doing your homework. There is no point goingto the hassle of changing credit cards if you let the balance just sit there forsix months and do not attack it with vigour.
3. STOP SPENDING
If your credit card debt is high, there is a good chance you are enjoying alifestyle you really can not afford. From new cars to flashygems and dining out, we all love the comforts that credit cards can afford - even ifwe cannot. This is going to make it tougher to make the cuts and put thatextra cash to good work.Think of it as a game, you versus the bank. The bigger the repayment, the more youwill start to feel in control of your life. There are plenty of ways you can shavemoney off your regular spending such as limiting yourself to only one takeaway meala week or taking packed lunches to work. Websites such as www.moneysmart.gov.au mayoffer some strategies to curb spending.Mearns does not believe people can budget their way out of debt but instead saysmany people need to become insolvent. This means they come up with a plan to payback their creditor over a period of time. "I think that people realise makingthe minimum repayment will not get rid of credit cards but it comes down toincome and a lot of people simply do not have the capacity to pay it off," he says.
4. STOP THE CYCLE
Avoid the temptation to start using your cards again once you have managed to trimdown that debt. The best way is to get the bank to reduce the available credit. Usecash when possible. If you use your card make sure you pay it back in the allocatedtime frame. Better still cut them up or hide them. Get a debit card for onlineshopping or convenience so at least you know it is your own cash that you areusing.
5. FIND THAT EXTRA CASH
If you are finding it tough to save your way out of the credit card trap, then theeasiest solution is to increase your earnings. Put your tax refund cheque straightonto your card. Any Medicare or childcare rebate can also be put towards reducingyour deficit. Try selling your old treasures on Ebay or holding a garage sale. Lookfor a second job, even a few casual shifts may be all it takes to get back to black.Even better it could put real money not plastic in your pocket for future shoppingsprees.
