Friend or foe? Your credit card can provide you with access to many of the best things in life – holidays, shopping sprees, fancy restaurants to name but a few. The post event hangover however can leave you wondering whether the pleasure was all worth it.
Credit card debt comes with a price both financially and emotionally. Credit cards carry some of the highest interest rates of any form of debt – sometimes in excess of 20%. That can be a lucrative little number for the banks and lenders but not so good for you. Credit card debt in Australia is estimated to be over $32 billion – that’s over $4000 of debt for every credit card holder in the country. It costs the country over $5 billion per annum in interest payments alone. For those with the high balances that are spiraling out of control, credit cards can cause emotional pain and lead to relationship breakdowns and other issues.
Controlling your credit card debt is one of the most important aspects of an overall debt plan as ignoring this aspect will find it difficult to reduce your debts. Due to its high interest rates and easy-to-access nature credit card debt can quickly become a major problem if allowed to get out of hand.
Here’s some steps that will help you bring it under control:
- Get rid of extra cards. Having multiple cards will lead you into temptation. Just because a lender sends you a new card doesn’t mean you should use it. Cut up cards you don’t need and try to keep your spending on just one card where it is easier to keep an eye on it.
- Commit to paying more than the minimum amount. Only paying the minimum leaves you with an expensive interest bill on the rest. Anything you can pay off your balance will ultimately put more money in your pocket.
- Take your card out of your wallet. You will be more likely to use it if it’s easily available. Having your credit card with you while you shop is a recipe for disaster. Keep it away from easy access so you have more thinking time before you a tempted to use it.
- Wait until you have the money. How often are we guilty of buying something we don’t actually need right now? Not accessing credit cards will force us to wait until we have the cash to buy it – and we will often find we don’t need it at all. Most “have-to-haves” are more often than not “want-to-haves” that we can do without.
- Don’t be sucked in by “Me too” behavior. If your friends love to eat at expensive restaurants or have the latest and greatest you don’t have to try and keep up with them. Tell them you are wanting to bring your credit card under control and they will understand your need to opt out. You may even be giving them permission to stop getting caught in the treadmill too.
Uncontrolled credit card spending will cause you needless financial stress. Decide that you will accept responsibility for your own financial wellbeing and kick the temptation to the kerb once and for all.
If you are concerned about your credit card debt you should consider getting professional advice from someone who can help you understand your options and establish some workable goals for debt reduction.
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The information in this article is general in nature and does not take into consideration your personal situation or circumstances. You should consider whether the information contained in this article is suitable to your needs and where appropriate, seek professional advice from a Financial Advisor or other finance professional.