Credit card debt certainly has a way of creeping up on us. A recent RateCity survey found one in three Aussies between the ages of 55 and 64 have more than $1000 in credit card debt, while one in 20 have more than $10,000.
With Christmas on its way, you may think adding to that debt is inevitable, but there are ways to do the opposite, and reduce it to zero, before the silly season comes. The key is to significantly reduce spending over the next 10 weeks and to channel any excess money into your debts. The following tips may help.
Transfer any high interest debt to a low interest card
It’s very difficult to pay down debt when any dent you make is negated by a high interest rate. You may have made big sacrifices to pay off $100, but when you get an interest bill of $80 at the end of the month, it doesn’t feel great. If you have mounting debt, you may wish to consider putting it on a low interest or 55-day interest free card, so that money you put onto the card actually goes towards your balance.
Try to reduce spending by 20 per cent for eight weeks before Christmas
This is an ambitious plan, but if you have a typical credit card debt of around $1000 and a household weekly spend of $600, you could pay off 96 per cent of it by Christmas by trimming your budget by $160 a week for eight weeks. If you start now, that still leaves you two spare weeks before Christmas to do your shopping.
Cut out two discretionary items per week
We all have little luxuries that get us through the days and weeks. But having a bit of a pre-Christmas Lent and trimming back on one or two of them could help you to save several hundreds of dollars a week, depending on your vice of choice. Say you buy two coffees a day at a café, if you cut out one, that’s a saving of around $25 a week or $250 over 10 weeks.
Reassess direct debits
Subscription services, whether its media streaming, wine of the month club or a public transport card top up, certainly make life more convenient, but over a month they can add hundreds to your credit card bill. Spend a few hours reviewing how much is drained from your account through automatic payments and try to roll that back, at least temporarily. It could help you to slice your credit card debt. Good luck!
This article was produced by financial comparison website RateCity.