How to get your credit card debt under control

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It can be very tempting to overindulge during the festive season – and we aren’t just talking about pudding.

Christmas is one of the most expensive times of the year, and when your credit card statement arrives in January, you may be in for a big shock.

If your New Year’s resolution was to get your credit card spending under control, how do you ensure you will achieve that goal?

Understand how your credit card works
Credit cards are actually quite complex products, so it is not surprising that many people find them difficult to understand. Here is a breakdown on some of the more confusing aspects of credit cards.

Minimum repayment amounts 
When you read your monthly credit card statement, the most prominent figure will generally be the “minimum repayment amount”. This is a relatively small amount compared to the total balance owed on the card.

You must pay the total balance owing every month if you want to avoid interest charges. If you simply pay the minimum repayment amount on your credit card statement, you will pay significant interest charges on the remainder of your outstanding balance.

If possible, limit your spending so that you can pay off the full balance owing every month. Credit cards can be a useful way to manage household finances – provided they are paid off every month and not used as a type of long-term debt.

Interest rates on cash withdrawals 
If you withdraw money from an ATM using your credit card, you will be charged interest immediately on the amount you have withdrawn and that could give you a nasty surprise at the end of the month.

Balance transfer deals and rewards points 
Banks generally advertise credit card zero or low interest balance transfer deals to attract new customers. However, these cards often have very high interest rates once the balance transfer period ends, sometimes more than 20 per cent per annum.

New purchases on balance transfer credit cards can also attract interest charges immediately. This means that if you want to make new purchases, or if you can’t repay your entire balance within the specified transfer period, then a balance transfer deal probably isn’t the right option for you.

Banks also often advertise “bonus” reward points for new customers, but it’s important to check the fees and charges associated with the card to see if it really offers you value for money. A basic low-interest credit card might be a better option.

Ways to control credit card debt 
1. The ultimate solution – cut up your credit card.

2. Contact your bank and reduce the spending limit on your card.

3. Leave your credit card at home more often.

4. Nominate particular months of the year to reduce your expenditure – a bit like FebFast, when participants cut their alcohol consumption.

5. Say why before you buy.

6. Reduce your spending by:

  • Limiting how many coffees you buy in a week. Try replacing two of these with your own plunger or instant coffee. Possible saving: $416 per year.
  • Reducing your restaurant or takeaway meals by one per month. Possible saving: $720 per year.
  • Going grocery shopping with a list and buying only items on the list. Possible saving: $480 per year.
  • Buying petrol at the bottom of the price cycle and using your shopper dockets. Possible saving: $120 per year.
  • Considering a house swap for your next holiday. Possible saving: $1000.
  • Going to the movies only on discount days and nights. Possible saving: $80 per year.
  • Buying gifts ahead of time when sales are on, not at the last minute. Possible saving: $200 per year.

How did your credit card handle the Christmas period?

Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

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Total Comments: 29
  1. 0

    If people still can’t control their spending especially at our age there is no hope.
    Pay off your card with a personal loan at lower interest, cancel your card as just cutting it up will still incur fees, prioritise your bills & pay them first before you spend on ciggies, booze, gambling & even food, & if you can’t pay cash then you simply can’t afford it so don’t buy it, just like the old days.
    work to a budget. Even Centrelink will help in this area or even your neighbourhood support groups & church groups.

    • 0

      Yep – just cutting up your card is a terrible piece of advice. Always cancel it.

    • 0

      Yes 1984.How many times does this article have to be run before people get it. If you can’t afford to pay your credit card in full every month you just can’t afford a credit card!

      Having said that, the relentless march towards a cashless society is adding to debt. It is just too easy to flash the plastic even for small amounts like a paper, a coffee, or all manner of sundries previously paid for in cash, and it is easy to lose track unless you remain vigilant. More of an issue for those younger than the readership here I would have thought but still a growing cause for concern for those with no self control over spending.

    • 0

      By far the best advice here!
      I have a zero annual fee ignite card with Westpac & an American Express card which is also zero annual fees which is awesome as it accrues fight points wit Velocity/Virgin so ‘free’ flights for just using it to buy the usual stuff & pay bills with it (as long as i pay the balance before end of month as suggested) Works for me anyway

    • 0

      If you haven’t learnt how to control your money by the time you are retired you never will!

    • 0

      very true Noodles but we come from a generation of growing up saving for what we needed or wanted well before credit cards. Unfortunately our children & grandchildren will & do find it a bit tougher.

  2. 0

    What unmitigated nonsense to say, “Credit cards are actually quite complex products.” They are just simple debits and credits. In other words plusses and minuses. Anybody who finds them complex should definitely not have one until they have learned to add and subtract, and learned about cash.

  3. 0

    Credit cards are awesome. I love getting freebies for spending money . Just been planning a return free flight to Tassie thanks to my credit cards. That free travel insurance is great too. All those freebies for no fees and no intetest so why not take advstage of them?

    • 0

      My card provider hates me, I have not spent a cent in interest for thirty years and average about $250.00 in free Gift Cards a year.
      Credit Cards are a tool, and like any tool you just have to learn how to use them to get the best result. You can spend what you like just as long as you can afford to pay off the balance at the end of the month. If you do this you can afford to get a high interest card with no fees and still be ahead of the game, it just takes a little discipline.

    • 0

      Spot on, ex PS. My card provider hates me too.

      When you are issued with a card, sign a direct debit authority to have the full balance deducted from your savings account on the due date every month.

      I opt for card with fees because of the brilliant benefits – free travel insurance, free purchase insurance, extended warranties on everything, reward points that way more than cover the annual fee, and a host of other goodies.

      You get a convenient record of all your spending, gift cards every year, the security of not having to carry cash, a host of special benefits, and on a couple of occasions I’ve had my card provider cancel payment to a shonky merchant who wouldn’t refund on faulty goods.

  4. 0

    Bring on the cashless society. Get all the crooks.

  5. 0

    I love my credit card. I pick up a nice little pile of gift vouchers every Christmas with the reward points. I authorised my bank to pay the card balance in full on the due date by deducting from my savings account, so I never pay interest. It’s a wonderful convenience. I don’t overspend because I don’t buy what I don’t need. But seriously? $416 a year on coffee? I could count on five fingers the number of times I’ve bought pre-made coffee. Aldi sells the best flavoured instant there is and it’s cheap as chips. And if you can spend $60 a month on restaurant or takeaway meals, you are either doing very nicely and should have no worries paying your credit card debt or you are an irresponsible spendthrift.

    • 0

      Don’t buy gifts and you will save thousands.

    • 0

      And I would be desperately poor, OG, as clearly are you – though you are too selfish to recognize that fact. I love my family. I am very careful to select gifts that are of sound value to them – educational opportunities for my grandchildren, a special night out or a few days away somewhere peaceful for children who are exhausted from the pressures of work and parenting, a safe heater and quality blankets for an elderly loved one… I don’t need to save thousands by depriving loved ones of a little practical help and the joy of knowing how much I care.

  6. 0

    They can be a trap for low income families.

    • 0

      They ARE a trap Misty. Even middle income earners have an issue with them unless they are disciplined with their budgets

    • 0

      They are NOT a trap for low income families if they have common sense. They are a trap no matter what your income if you are brainless and undisciplined. They are a wonderful convenience. All you have to do is not take them out of your wallet or purse if you can’t pay for the item WITHOUT a credit card. They are currency. You use them to save a trip to the bank or ATM. If the money isn’t sitting in your bank account to pay the balance immediately, don’t use the card.

    • 0

      It’s a trap for everyone as prices would be lower if we were all living within our means and not using debt so wildly to pay for everything. Ever noticed how cheap things are in cash only third world cities?

    • 0

      I think that prices are lower in Third World Countries because thy simply can’t afford to pay higher prices, I would not say that the standard of living is better in these countries.
      If people would considered what items were worth rather than how much they think they have to have them, prices would be driven down.
      The manufacturing industry sets prices by considering how much the consumer will pay, not by how much the goods are actually worth. A simple exercise in reverse engineering of most items will disclose just how much the customer gets ripped off at times. In a fair system once research and development costs are recovered there should be a reduction of cost especially for items such as drugs and essential medical prosthetic.
      As far as Credit Cards being a trap, those who are susceptible to debt will find alternative ways to get themselves into trouble, it is in their nature. If they can’t borrow from the banks they will borrow from friends, relatives or even worse loan sharks. Best let them make their own choices rather than punish those who know how to use credit effectively.
      Maybe re-introduce basic household financial management into our schools. In grade ten I was shown how to fill out a cheque, a deposit slip and a withdrawal slip, I had a bank book and new how to save if I wanted to.
      By the time I was twelve I was making a good profit lending money to my working older brother at a reasonable interest rate, a good little earner, he would run out of money by Friday, borrow money from me that morning and pay it back with interest that afternoon.

    • 0

      Are you still good mates exPS?.

    • 0

      He has to be, I still lend him money from time to time. But seriously, I never charged him above the going rate and allowed him to pay with stuff that he had out grown. We have always and will continue to help each other out without question when needed. That is what family does. By the way since I started work myself I never charged him interest and I’m sure he wouldn’t have if the situation was reversed.

  7. 0

    If you cannot pay your card off in full each month…don’t have one.

  8. 0

    I will still vote liberal I cannot image what Bill Shorten and his union colleagues will do to this country. Not all are aware of how the government does look after older people who are cared for at home. I look after my dad and I am surprised at what is available to look after their care.

    • 0

      Don’t vote LNP or ALP vote independent, Green, CPA anything but LNP. Send these parties due notice that voters will look past the 2 party policy until they start running the country for the people & not their own interests

    • 0

      The Drover’s Dog could do a better job of running this country at the moment, until the Coalition gets its act together and get rid of old dead wood, elect more women and unite, they will certainly lose the next election.



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