Beating the Credit Card Trap
Executive Summary By Alex Tilbury

THERE is no secret to paying off your credit card debt quicker.

All you need to do is source a lower interest rate card and increase your repayments. Or better yet, do both, simultaneously.

Pay more than the minimum repayment as it will take you about eight years to pay off a $1000 card debt if you only pay the minimum monthly obligation.

The gifts that keep on taking

As financial adviser Bruce Brammall says: “Christmas is one day but too many people seem to make it cost them about three months”.

“If your credit card is still smoking from overuse on Christmas presents and the post-Christmas sales, then you’re probably going to start 2009 a little behind the 8-ball”.

“Grab a list of your debt. One credit card? Or many credit cards? Find out which one has the highest interest rate and start paying that down first. “Give your bank a credit check. Find out if they have a credit card with a lower interest rate card and then demand to swap your old card for a new one”.

Brammall also says return any unwanted gifts for cash.

“I know this next one sounds a little stingy, but are there some gifts that you received that you just know you’ll never use? Can you return them and use the cash to pay down some debt?”

Have fun for free

Put your credit card in a cup of water and freeze it if you have to.

If you are living off your credit card, stop spending. Take the children to the beach instead of a theme park, or hire some DVDs instead of going to the movies.

If the debt on your card is more than you can afford to repay, and you are paying a high interest rate, consider transferring your balance to a card that offers very low interest for balance transfers, and then make a plan to pay down the debt.

Low Credit Card

New Year’s review

Stuart Holden, financial adviser at Green Associates at Murarrie, says if you have a number of credit cards that are accruing interest you should consider a balance transfer.

“This will allow for a number of credit cards to be transferred on to one: one interest rate, one repayment and the benefit of a reduced interest rate”.

Balance transfers are a way of consolidating debt and with a little tightening of the belt and an accurate budget these can be paid off with minimal interest being charged.

Nail the debt

If you’re in deep debt, the best thing to do is to see a community-based financial counsellor.”

Scott Pape, financial adviser and columnist has devised a step-by-step plan to slash your debts.

Step 1

Apply for a low balance transfer credit card and move your old credit balance across to the new balance transfer card.

Step 2

Cut up your old card and your new balance transfer card (or you’ll end up spending again).

Step 3

Apply for a Visa debit card that has the same functions as a credit card but that uses your own cash.

Step 4

Start making payments every pay day until it is paid off in full.

Step 5

Then celebrate. You’ve achieved something that most people haven’t.

Another interesting article: Cards Bad