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‘We had to refinance’: One woman's journey out of $28k debt

Natalie Procter and her husband Dan and their three children Max, Lily and Holly. Images: Supplied, Getty

When Natalie Procter got her first job at 19, she also got a credit card thinking “that’s what grown-ups do”.

But that decision led her to a spiral of credit card hopping that eventually left her, and her family, needing to refinance their home to pay off $28,000.

"Initially I was really good at paying it off in full every month, but as my lifestyle became more social I ended up going out more and wanting more clothes, going out for dinner, so I started spending more and then I was offered more credit in a letter out of the blue so I accepted and it just spiralled from there," Procter, now 44, told Yahoo Finance.

This is the fifth time the Procter’s have refinanced to reduce credit card debt, with Procter also having won a car only to sell it to try to shift the debt.

“For us it was easier to refinance the debt with our mortgage rather than take out another credit card as it would have needed a $20,000 limit on it as that was how much was owning at another time in the past.”

Today, she does have a credit card but it’s kept under lock and key for emergencies.

“It is so easy now with tap and go to just get the credit card out and use it. You end up living beyond your means. You know you shouldn’t be doing it and anxiety builds in you.

“It's a horrible feeling when you realise that you’re not going to be able to pay it off in full anytime soon."

The lesson

According to the Australian Securities and Investments Commission (ASIC), a third of Australians who moved from one credit card to another to try to take advantage of a zero-interest period actually increase their debt by at least 10 per cent.

“Credit card hopping is when you find another credit card with a lower interest rate, often zero interest for 6 or 12 months, then transfer the debt to pay it off, which works well if you are disciplined and do just that,” said David Wareing, co-founder of GetReminded, an app which allows users to set reminders for when zero-interest periods end, or for when it’s time to renew a policy or shift.

“But many don’t [use them effectively], in fact 1.9 million Australians are struggling with credit card debt with the average credit card balance just over $3,000 and two thirds of that is the average amount accruing interest,” said Wareing.

“You also have to add on annual fees and late payments which totalled about $1.5 billion dollars in a 12 month period for Australians carrying credit card debt.”

“Credit card hopping can work to your advantage but only if you use it with the aim of reducing debt and actually pay it off.”

How do I get better with my credit card?

Shop around : Take advantage of comparison websites like Finder and Canstar to make sure you get the best deal. Once you’ve done this, make sure your bank doesn’t change that deal.

Close old accounts: It seems obvious, but it’s also very easy to put an old card in a draw as an emergency card, only to end up using it in addition to their regular credit card, accruing two types of interest and fees.

Set a reminder: Wareing suggested those looking to pay down their debt use GetReminded so they don’t forget when the interest free period ends. That way, you can avoid being stung with massive interest rate increases.

“Those customers who effectively use interest-free credit can be better off and can save on fees and credit charges. However, only those customers who are disciplined to make sure they know their expiry dates and either pay off the balance or move to another credit free period can benefit,” he said.

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