High interest card debt is non-deductible
Reducing non-deductible debt is the first step to a brighter financial future for the majority of people, says Gemma Dale, head of technical services at MLC.
“The number one thing is always credit cards because they generally have the highest interest rates,” she says.
Credit cards can be a handy tool if you pay them off in full each month, but in reality, the majority of people don't.
Dale suggests switching your plastic debt to another offering an interest-free period, but “the critical point is you must pay within those six months”.
If you don't read the fine print, you may end up paying interest for the entire time, including the ‘interest-free' portion, warns Dale. If you have several credit cards, tackle the one with the highest interest rate first. And if you've got $5000 debt on a credit card and $5000 in savings, don't fool yourself into thinking you've got $5000, says Dale. “Your savings might earn you 5 per cent, but your credit card will cost you 20 per cent. You'd be better off starting from scratch.”
Source: The Age