It is extremely easy to get a credit card and just as easy to get into credit card debt. With the current card rates increasing, paying off credit card debt has become an impossible mission.
Purchase and cash advance rates on some credit cards, particularly some low rate credit cards, have gone up by more than the official cash rate this year. Card issuers have also been changing their low-rate or zero-rate balance-transfer deals, shortening the periods for which the low rates apply. Many cards have purchase rates over 20 per cent now, with cash advance rates even higher!
The current high interest rates make it difficult for people to manage debt — especially if only making the minimum payment. In fact, just making minimum payments can make even the smallest balance over a decade to pay off and thousands of dollars in finance charges. It’s no wonder debt reduction seems so hard. Here are a few basic steps that should help you pay off your debt sooner, with less interest, and improve your credit score in the process.
- List all your credit cards and include the outstanding balance, interest rate and minimum payment
- Order the cards on the list so that the credit card with the highest interest rate is at the top, and the lowest is at the bottom.
- Total the minimum payments: this total will be your absolute lowest monthly payment. But you should pay more than the minimum in order to repay the debt quickly.
- As your payments come due, pay the minimum on each card except for the one at the top of your list. That one has the highest interest rate and is costing you the most money. Whatever additional money you can pay, apply it to that card.
- Continue this process until the first card is paid off. Repeat this process until all cards are paid off.
If you are struggling to manage paying off multiple credit debts from numerous providers then you might consider Debt Consolidation. It is one way to consolidate all your debts into one easy to manage repayment. lifeafterdebt.com.au can assist by you by providing an independent assessment of your financial position to determine whether debt consolidation is right for you. Contact us now!