Plastic can sometimes be classed as the root of financial destruction as it can wipe out families financial foundation leaving them with nothing more than bad debt(s) that cannot be repaid.

These simple ways can help reduce and eliminate credit card debt:

Balance Transfer & Consolidation
Combine all outstanding credit card debt into one account by consolidating all balances from the highest interest bearing credit card accounts to an account with the lowest possible interest.

Never Just Pay The Minimum
By just paying the minimum monthly payment you will find your balances getting virtually nowhere. The credit card companies are here to make money, lots of money and they do this by setting the minimum payment as low as possible so that you end up paying more interest for a longer period of time.

Card providers have lowered the minimum payments from 3 or 4 per cent of the outstanding balance to as low as 1.5 per cent in some cases in recent years.

Pay With Cash Not Credit
If you want to purchase something – use cash not credit. The convenience of credit may look very favourable but the only person who will pay for it in the end is you.

Don’t Use Credit Just For The Rewards
Rewards are a marketing ploy used by credit card providers to draw new customers in and to maintain the use of credit. Credit cards which carry reward programs usually charge an annual or monthly fee to sustain the reward rate on the cards.
The simple and logical approach would be not to use the plastic just because you can earn a point or two. Think about whether you are spending enough on your credit card to offset the cost of keeping the reward program.

Don’t Fall For The Teasers
Credit card providers have found a new and exciting way of increasing the credit spend trade by marketing introductory balance transfers with rates of between 0% to 6% interest for a period of 3 months to 1 year.

Generally individuals who are struggling to pay more the minimum payment on their credit card debt(s) transfer their balances across to these special introductory offers only to find themselves in a much worse position than if they hadn’t transferred their debt across in the first place.

The simple reason for this is that most people after transferring their balance(s) across relax with their payments because the interest is so low to start. Once the introductory period ends the revert rate is a lot higher e.g. 18% and can’t handle the increase in minimum payment.

Don’t Cash Advance
If you don’t have the money to start with to pay the credit card provider don’t use the cash advance facility. The cash advance facility is to be used for emergency purposes only. If you know that you will be unable to repay the cash advance in the nominated interest free day period, don’t use the advance facility.

The cash advance is also generally charged at a higher rate even with discount credit card providers as it is not classified as a purchase.


Budget
Budgeting is a simple and effective way to free up cash and pay off high interest bearing credit accounts. An extra $100, $60 or even $30 per week can play a major part in diminishing your credit card balances and getting you a clean bill to financial health.

Tracking your spending will allow you to decide whether some expenses can be adjusted or whether they are required at all.  It is a good idea to create a simple budget and refer to it from time to time to help alleviate the pressure that out of control credit card debt can create.


About the Author

Petros Arvanitis is a specialist mortgage planner who has helped hundreds of Australian’s rebuild their credit, lower their repayments and plan for a brighter future. He is the founder of Why Group, providing Australians with a simple and fresh approach to financial services.

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