How to avoid debt ghosts in 2017

Sins of spending past have a sneaky way of coming back to haunt you.

And with over Australians facing an $32bn post-Christmas credit card bill there may be a lot of debt ghosts reappearing after the holiday spending splurge.

The whopping $32.3bn billion credit card bill (and growing) - on top of AUD 5.5bn interest owed- works out at around $4,300 per card holder, according to Australian Securities and Investment Commission (ASIC) live credit card debt clock.

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30 - 49 year olds are the most likely to live off credit cards if they run out of money, according to consumer advocate Choice.

Here’s how to avoid debt ghosts in 2017.

1. Set a budget
Look at your salary and your expenses and identify how much money you can comfortably pay off your credit card each month.

2. Pay more than the minimum amount
One of the best ways to pay off your credit card debt quicker is to pay off more than just the minimum repayments each month, says Mortgage Choice chief executive officer John Flavell. This minimum amount is usually 2% of your closing balance.

3. Switch credit card lenders
Switching to a different lender may help pay off debt faster. A number of banks offer balance transfer credit cards with a 0% interest rate for a limited period.

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4. Limit credit card usage 
Slashing your overall credit card limit, prevents you from accruing unaffordable levels of debt on your card.
 
5. Consolidate your credit card debt with your mortgage account
Consumers who really struggle to pay off their credit card should speak to their local mortgage broker about debt consolidation, believes Mortgage Choice chief Flavell. This will allow you to effectively reduce your interest rate, which will make your regular repayments more manageable.

Failing all this, consumers should also contemplate putting the credit card away altogether.

“While there is no shortage of encouragement to spend up big, we would encourage Australians to take it easy this holiday season and try to avoid waking up with a new year credit card hangover,” warns Matt Levey, CHOICE Acting CEO.

 

 

 

 

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