Paying down your credit card

Being caught in the credit card debt trap can be frustrating and expensive, but these five hassle-free tips can help you to reduce your balance. The minimum payments you make on your credit card each month go towards paying exorbitant interest charges, while your actual debt reduces slowly.

So how do you pay down your credit card debt without tightening your budget to the extreme? It may sound impossible, but here are five methods to consider:

1. Conduct a balance transfer
Take a look your statement and find out what interest rate you’re being charged on your credit card debt every month. Then, find a balance transfer offer which comes with a reduced rate, allowing you to pay off more of your debt and less interest. Many of the balance transfer deals on offer tend to last for around six months. If you have a larger debt, try to find one that extends for 12 or even 18 months.

2. Increase your repayments
Combine a balance transfer deal with higher repayments and it can help reduce your balance. Why? Higher repayments mean more of your money will go towards your debt rather than interest, and because a balance transfer eliminates hefty interest charges this effect is accelerated.

3. Pay before you save
It is worth considering using the money from your high interest savings account to pay off an outstanding credit card balance. The interest from a credit card is generally higher than the interest earned from a high interest savings account, which means that the money used for saving will be more effective paying off the outstanding credit card balance sooner and avoid the interest building up over time.

4. Pay more, more often
Just because your credit card statement says you need to make at least one monthly payment of the minimum amount stated, this doesn’t mean you can’t divide that payment up and pay it more often. Divide your regular monthly payment into four and pay that smaller amount on the same day each week.

For example: if your minimum monthly payment is $100, divide this figure by four and pay $25 per week instead.

When you pay smaller amounts more frequently, you should find it’s much easier to budget for. There’s another huge benefit to making your payments this way. Your bank calculates interest on your outstanding balance at the end of every day. If you can reduce your balance even a little bit every week, the amount of interest you pay is automatically reduced. As a result, your payments end up paying your debt off much faster without you paying any more.

5. Give up luxuries and stop adding to your debt
Perhaps the most important part of reducing credit card debt is to immediately stop adding to it. Don’t pull out your credit card to pay for unexpected bills. Call your provider and arrange a payment plan with them directly instead. Don’t put any non-essential items on your credit card, and stop spoiling yourself with new purchases. If you don’t think you can trust yourself you may even have to cut up your credit card, or freeze it into a block of ice.

The key to paying off your credit card debt without any hassle is to find out what works for you. Think about which options will benefit your budget and your income. Work out your plan of attack and stick to it. Before long, your credit card balances should be back under control and you won’t have the worry of debts hanging over your head.

Find a balance transfer offer that comes with a reduced rate

This was written by Jeremy Cabral, the personal finance publisher of which includes, a free online comparison service to help Aussies make informed decisions.