Being smart about credit card debt could save the average Australian household approximately $1,500 a year. So how can you make these savings? Read on for tips on how to keep on top of debt and grow your savings.
The Debt Dilemma – Minimum Repayments
Let’s say you owe $5,000 on your credit cards and at an interest rate of 18%. The credit card companies might ask you to make a minimum payment of $150 a month. If you continue to make the minimum payment alone, you could get yourself into years of debt.
Transforming debt into savings
By relying on credit cards, some people throw away tens of thousands of dollars over decades. This credit card debt presents an opportunity for significant savings.
When you eliminate credit card debt, this money will be freed up money to be spent on anything from luxury to investment. A simple way to earn 18% or better is to get rid of credit card debts as soon as possible.
How to Face Credit Card Debt Head On
The best way to start is to set goals for yourself. Develop a realistic plan to eliminate the debt as soon as possible. Keep track of what you are spending money on to help identify unnecessary spending.
Also avoid new debts that will add on to the existing ones. Put cards away for a while and try to pay for daily purchases in cash.
How do you know when you have a problem?
The average person shouldn’t be paying more than 10% of net take-home pay on credit card and other consumer debt. If you’re paying more than that, it may be time to control your debt.
Saving $1,500 a year in credit card interest may not seem like much, but over the long term, it adds up; over 30 years, it can get up to $45,000 in interest savings.
For most individuals, a savings of $45,000 over 30 years could make a big difference. Think of the opportunities for productive use for that money! For those with a credit card debt problem, eliminating it could be the best chance over the course of 30 years to build up savings and investments. Being smart about credit card debt is one foolproof way to increase wealth over the long run.