Australians increasingly depend on plastic to pay household bills. However, if you want financial freedom and financial security, cutting your credit card debt should be a top priority.
Australians owe almost $50bn on credit cards – an increase of 42% in the past five years, according to recent RBA statistics.
The average credit card debt in America is $3321, but financial experts believe that the average family credit card debt will be significantly higher, as many families are paying multiple cards.
There are currently more than 14 million credit cards lining wallets in Australia – with almost every adult owning at least one.
And more than two-thirds of consumers’ outstanding debt is accruing interest at the average rate of nearly 20% – the highest it’s been in 20 years.
Recent reforms in credit card policy include the removal of over-limit fees, prohibiting unsolicited credit limits upgrades, allocating card payments to high-interest debts before they are due, and including complete account features in credit card applications.
Andrew Cartright, MasterCard Australia Country Manager, says that Australians who are struggling to repay credit cards must understand the situation and create a plan to get it paid off.
These tips will help you get your borrowers back to the black.
1.) Stop spending: sounds ridiculously easy, but you can’t climb out of a hole if you’re hell-bent on making it bigger.
2.) Take stock. Get all your statements from credit cards and examine them. Facing the debt can be a major obstacle for people, but you can’t tackle your debt demons until you know exactly what you’re up against.
3.) Set a goal: Determine your long-term goal – for instance, pay your debt off in three years, then break it down into bite-size chunks. As you work towards the finish line, it will be easier to motivate yourself by setting short-term goals.
4.) 4.) Plan of attack: Write down your plan and make a budget for your monthly expenses. You should not spend more than you can afford and you should look for ways to get more from your earnings. Try to create an emergency fund, so you plan doesn’t get derailed by unforeseen circumstances.
5.) Dear diary: Write down how much you spend each month to see where you can trim fat.
6.) 6.) Reduce the interest by paying as much as you can afford.