4 hot tips to control your credit card debt

The end of financial year (EOFY) is fast approaching, which means retailers are clearing their shelves for new stock and offering discounted items.

However, EOFY sales (as tempting as they may be) don’t mean we should be turning to our credit cards and spending beyond our means.

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With a sale sign popping up in every store window and in online shopping carts, it’s easy to get swept up in the spin and lose track of how much we’re spending.

Many of us find credit cards are the easier option when purchasing, and the debt that follows will eventually get paid off.

But spending on plastic can come back to haunt you and potentially get you into financial trouble if you’re not careful.

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The best way to turn this around is to control your EOFY spending and make your tax man proud.

A finder.com.au study has found that 40% of Australians own a credit card, 19% own two, and 8% own three or more. However, with credit card accounts dropping to the lowest level in two years since 2016 (there are currently 16.54 million credit card accounts, and the last time it was this low was April 2016), there’s no better time to implement these 4 tips into your brain and into our wallet.

1. Consolidate your debt (if you have several cards)

Don’t stress yourself out with multiple debts and payments piling up. By combining your debts onto one credit card it becomes easier to know how much you owe and not to miss any payments (which means you can avoid paying any late penalty fees).

2. Pay more than just the minimum

Aim to pay more than the minimum repayment each statement cycle. If you can get on top of your debt sooner, no more interest will accumulate and you will become debt-free faster. An easy way to find out if this will fit into your budget is to work out how long it will take you to repay the debt on the MoneySmart credit card calculator.

For example, if you had $5,000 owing at 18% interest and paid $250 off a month, you would have your debt paid in two years. But if you only pay the minimum repayment, you are looking at paying back more than $17,000 over 33 years. Making the higher repayment in this case would save you over $11,000. The interest you save on early repayments may help get you out of debt.

3. Reduce your monthly credit limit

The EOFY is a great time to start fresh and give yourself a new (and lower) credit card limit. Tackle the debts now so you are not faced with the same issues this time next year. By reducing the amount you can spend, you are allowing yourself time to save and pay your credit cards off in time (and resist the urge to spend beyond your means).

4. Seek help, not more debt

It’s not easy to change your spending habits, so if you don’t think you can control your credit cards or if money management isn’t your forte, talk to someone who can help. A finance professional will assist you in finding the right interest rates and banks, and they can personally help you find what is best for you. At Financial Rights, a counsellor is always available to help you overcome that feeling of it all being too much.