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How to halve the interest on your credit card debt

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Credit cards: they giveth joy, and they taketh away.

Australians owe nearly $50 billion credit card debt, and that debt is felt the most in January and February as spenders grapple with the ramifications of their Christmas spending decisions.

But there’s another way, finder.com.au money expert Bessie Hassan told Yahoo Finance.

“A credit card can be a really useful tool if used correctly, but like any relationship, there can be heartache if you ignore warning signs of trouble,” she said.

“It’s one thing if you have debt from an emergency purchase or a large expense, like a car or a large appliance, but if you are using debt to cover things like your weekly groceries and bills, it’s time to put a new plan in place.”

Instead, Australians should consider personal loans.

Why?

As Hassan explained, personal loans generally offer you a lower interest rate than your credit card, often as much as 50 per cent lower.

And they have a fixed repayment date, rather than an ongoing line of credit. This means it’s easier to avoid falling into a debt trap or bad habits.

How?

Australians can transfer their credit card debt to a personal loan, Hassan said.

“Transferring your credit card balance to a personal loan is not only possible, in some cases it can save you thousands in interest,” she explained.

“Because you can pay off credit cards at any time, you essentially take the funds deposited into your account from the loan and use them to pay off your card(s).”

But before you do this, it’s important to find out what the interest rate is and how competitive it is.

Borrowers should also find out about the associated fees and charges, their borrowing capacity and how much they trust the lender.

“There are a number of ways to move in the right direction, but the first step is getting on the front foot, understand your debt position and what deals exist,” Hassan said.

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