In Australia, over 70% of adults have at least one credit card.
Options for credit card debt
Are you wondering the best way to clear your credit card debt? This will depend on many things such as, the level of debt, number of cards you have and your individual circumstances. Some of the choices you may wish to consider are:
– Paying off the balance in full before interest begins to accrue
– Pay off the maximum monthly amount that you can afford
– Transferring your balance to a new credit card offering a lower interest period
– Consolidating your debt into your home loan
– If you have more than one card, paying at least the minimum on each card whilst allocating a larger payment to the card with the highest interest rate
Have a plan to repay credit card debt as quickly as possible is the best option.. but you may wish to look into a balance transfer. Most lenders now offer balance transfers with a range of rates and offer periods (some even interest free periods). This means you can transfer the balance from your existing credit card to a new card at a lower (or even zero) interest rate for a set period to provide something breathing space to assist in reducing debt quicker.
It is essential to know the terms and conditions of the card AND be disciplined with repayments
Important points to understand:
– To maximize the benefit, you should pay ALL the balance which was transferred within the offer period
– Know the offer end date! Set up a budget to ensure this is reduced as much as possible before that end date
– Any transfer balance at the offer end date will attract interest at the cards standard interest rate
– Know the fees that apply and when they fall due, e.g. annual fee, or percentage of transfer amount
– Any new purchases made on the new card will usually attract interest at the cards standard interest rate – NOT the transfer interest rate
A balance transfer should NOT be used habitually to manage recurring periods of debt. Poor financial habits and/or multiple credit enquiries may negatively impact your credit score – even if the enquiry did not proceed. It could also affect a future ability to be approved for a home loan!
Together we may consider consolidating all of your debt (credit card balances, personal loans, car loans etc) into one loan with a much lower average interest rate. If you are a home owner, your home loan usually has the lowest interest rate.
When choosing your best option you should always start by creating a budget. Be brutally honest about your self-control when it comes to spending and repayments and then finding the fastest and lowest interest option to clear your debt.
Need help? Give us a call today! Let us help you get on track and reduce your debt in the most efficient manner.