How to pay down your credit card debt balance
More Aussies struggling with credit card debt
There are more than 15 million credit cards on issue in Australia and more and more Australians seem to be struggling to repay their credit cards, sending the average Australian credit card debt balance up. Average credit card debt was $2,000 in May 2016 according to data released this week from the Reserve Bank of Australia. That is up from $1,983 in April 2016.
The average monthly spend on an Australian credit card was $1,577 in May, up from $1,425 in April 2016. That means, on average, Australian credit card holders are not repaying their purchases within the interest free period and are building up debt that attracts interest.
Credit card interest rates can be very high, up to 29 per cent. Paying down card debt is therefore a very important part of taking control of your finances.
What is the minimum monthly repayment?
Just repaying the minimum monthly repayments on your credit card means your debt will take years to repay and interest charges will add your debt burden. Many credit cards require a two per cent repayment each month. That means you are only required to repay two per cent of the total debt.
What are the options for repaying credit card debt?
For people struggling to repay their card debt, there are options that can make the task easier. Zero interest rate balance transfer credit card offers, low rate credit cards and debt consolidation personal loans can help people with unsecured consumer debts like credit card balances to get on top of their money issues.
For people who find themselves in financial hardship because of unemployment or unforeseen circumstances should ask their bank or credit union for hardship assistance or call a free, government funded financial counsellor on 1800 007 007.
Balance transfer credit cards
If you have a credit card debt that is attracting interest, switching to a low rate or zero rate balance transfer credit card may be a good option for you. Balance transfer credit cards offer an introductory period of no (or very little) interest charges on debt balances that are transferred to the card from a competitor’s card or loan product. Some credit cards are offering 18 months of zero interest on balance transfers, giving you breathing space and a chance to pay off your debt without extra interest. Right now Infochoice lists 107 balance transfer credit card offers from all major Australian financial institutions.
Low rate credit cards
Credit card users that ‘revolve’ a debt balance from month to month and don’t repay it completely, can lower their interest costs by moving to a low rate card. Average credit card purchase interest rates are around 17 per cent. Some credit cards charge up to 29 per cent.
Low rate credit cards feature purchase interest rates starting at around 8 per cent. Right now, there are 164 low rate credit cards listed on Infochoice from all of Australia’s major banks and credit unions.
Debt consolidation personal loans
Some people need the discipline of set repayments and fixed term of loan repayment to get on top of their debts. transferring your credit card debt(s) to a debt consolidation personal loan can provide certainty and an end date for the repayment of your debt. Infochoice currently lists more than 30 personal loans available for the purposes of debt consolidation.