For many of us, having a credit card in our wallet is peace of mind. A little piece of plastic that ensures we always have a way to pay for things. Whether because your salary wasn’t deposited on time or because you need to buy a high-cost item, credit can come in seriously handy. But what happens when your credit card debt spirals out of control? Missed payments and surmounting bills are incredibly distressing. Knowing how to lower credit card debt and keep it down is a must for anyone with a credit card.
How To Lower Credit Card Debt
Avoiding credit card debt in the first place is always your best bet. However, staying on top of credit card debt can be complicated. High-interest rates can make it feel like no matter how much you pay down, the debt doesn’t change or continues to grow. Knowing how to lower credit card debt can save you money in the long run. There are some steps you can take that will help get you back on track.
1. Pay On Time
While this might seem common sense, it can be easy to miss a payment. Even if it is just by a few days, missing a payment can incur a penalty fee. Repeated missed or late payments also are registered on your credit history.
A good way to stay on top of repayments is to follow two easy steps:
- Set a reminder in your calendar.
- Set a direct debit to your credit card for the minimum repayment each month.
Following these steps can help keep your credit file healthy.
2. Pay More Than The Minimum Amount
It can feel like you’ll never get on top of your credit card debt when only paying the minimum amount. With interest adding to the balance over time, it’s a debt that continues to grow. What many credit card holders don’t consider is paying more than the minimum amount.
There’s no rule stating that repayments are an all or nothing affair. Just because you are unable to pay the balance in full, doesn’t mean you have to only stick the minimum repayment schedule. Even $20 extra here and there can help – it all builds up against the debt and helps bring down the accruing interest.
Creating a budget can help you work out what you can afford to pay each month, over and above minimum repayments.
If you only ever pay the minimum amount you’ll never get on top of your debt and you’ll pay a lot of unnecessary interest.
3. Reduce Your Credit Limit
One of the most effective ways to keep your debt down is to reduce how much you can spend in the first place. When you remove the ability to spend as much, the temptation is gone. There is many ways you can reduce your credit limit:
- Online via online banking
- In-person at your banking institution
- By phone
Most of the time the reduction will be almost immediate. Occasionally it can take a couple of days to take effect. Be sure that any direct debits you set up will not bounce once you lower your card limit.
4. Limit Your Number Of Credit Cards
Even one credit card can get out of hand. Juggling multiple cards with high, unpaid balances is best avoided. If you’re planning to cancel one or more credit card accounts, there are two ways to approach this:
- Pay off the card with the lowest balance first. This makes it more achievable in the short term which motivates you to continue.
- Pay off the card with the highest interest rate and fees first and then focus on the rest.
The second option is the most favourable as it saves you more in the longer term. However, if you’re struggling to stay motivated and feel that you are not making progress, option one may help. Often knowing how to lower credit card debt is about understanding how to keep yourself focused and on track.
5. Seek Out A Better Deal
Whether you have multiple cards or just one with a very high balance owing, a balance transfer is worth looking into.
What Is A Balance Transfer? A balance transfer works by taking your existing debt/s and rolling it on to a different credit card. The incentive to do this is usually in the form of a 0% interest rate for a period of time. If you can manage to pay the debt down during this interest-free period, you can save yourself a lot of money. Balance transfers should be treated with caution however as they can come with strict conditions. If you are unable to pay the debt down in the specified time, a higher interest rate than your previous credit card may apply.
If you have a number of cards and are looking at how to lower credit card debt, then Debt Consolidation is also a great option. By consolidating all your debts into one, you can not only simplify life but also save money. You can benefit from:
- Lower / frozen interest rates
- Only 1 repayment schedule
- Only 1 lender to make repayments to
- No more harassing calls
- New, flexible terms
Take Control Of Your Debt
If your credit card debt feels insurmountable and you need help finding solutions, Debt Consolidation Australia can help. Credit card debt can build up very quickly. Don’t let it cause you unnecessary stress and worry. Our expert consultants can walk you through how to lower credit card debt and start living within your means again.