Many people have ongoing credit card debts which they are finding difficult to pay back. These outstanding credit card balances attract interest charges at high rates and can slow down the process of paying off your debt. Most credit cards have interest rates as high as 15 – 20%.

If you have a home loan and have money available for redraw, it makes sense to pay off your high interest credit card debt with money you redraw from your home loan. Home loan interest rates are currently around 4 – 8% which is much lower than that of credit cards. Many home loans do not charge to access money for redraw.

If you currently have a credit card debt of $10,000.00 and your current interest rate is 19.99%, you would be paying $1999 over the year in interest charges. Not to mention any compound interest if you are not repaying much. If you borrowed this money from your redraw facility at a low rate of only 5%, you would pay only $500 over the year in interest charges. This is a difference of almost $1500 over the year. Paying off your credit card debt using your redraw facility can mean the difference between thousands of dollars a year. Instead of paying $1500 in interest charges, you could use this extra $1500 to pay off the principal of the loan instead of throwing it away in interest charges.

Using your redraw facility is a great way to clear high interest credit card debts and pay off your debt faster.

Credit card providers are in the business of making money. They provide us with so called generous offers such as minimum monthly repayments on our balance. Whilst sometimes helpful, these ploys can land us in a cycle of spiraling debt.

If used correctly, credit cards can reward us with a supply of free credit without incurring any interest charges. As long as we repay our credit card balance in full, we can avoid interest charges all together. However, this type of controlled spending on credit cards is in the minority. Most credit card holders choose to pay, or cannot afford to pay, more than the minimum monthly repayment.

Even those who use their cards wisely can get into trouble quickly. All it takes is a large unexpected expense such as car repairs or household maintenance to get you into trouble. If you are unable to clear this large debt within a month or two you will start to pay interest on this amount. The longer it sits there the more the interest charges will accumulate.

In recent years we have seen credit card debt spiral out of control. Many people are living beyond their means and rarely if ever clearing their credit card debt. The interest charges on this type of debt are very high.

This cycle of debt can be difficult to get out of. Firstly, you need to be aware of just how much your debt is costing you. You then need to make a decision to increase your payments as much as possible whilst cutting back on spending.

Other things you can do to help ease the situation is to look at transferring your existing debt to a low rate credit card. Another thing to consider is transferring your balance to a good balance transfer credit card. These options may give you a little time to clear some of the debt whilst reducing the amount of interest you will be paying back.

Whilst paying the minimum monthly repayment only can seem helpful in the short term, we need to be aware that it can be very costly in the long term. Even if you’re unable to clear balance each month, paying as much as you can will ensure that you avoid certain debt.

This should be a question we ask ourselves when making a purchase. Many people like to keep a supply of cash for making small purchases such as a cup of coffee. However, we should be paying by cash for moreIt is often too easy to pay with your credit card and deal with the bill later. However, this approach could be getting you into further credit card debt.

You should ask yourself the following questions?

Am I nearing my credit limit? Have I cleared my balance from last month? Am I able to pay off the credit card by the due date?

If you are up to date with your credit card payments and are able to clear your debts by the due date, then there’s no reason why you should not use your credit card for purchases.

If you still have unpaid debts on your credit card and are not paying your balance off in full each month, then you are better off to pay for your purchases with cash. By continually spending on a credit card which you are unable to pay off, you will only get yourself into further trouble.

Avoid Fees & Charges by using cash instead of your credit card.

Avoid paying interest on your purchases by using cash until you clear your current credit card debt.

Whilst using your credit card is a tempting and easy way of paying at the checkout. Stop and think about the consequenses of your actions. By using cash instead of your credit card, you can save you on extra fees and charges and avoid paying high interest rates.

In these uncertain times, you should be thinking about reducing any unnecessary debt. If you can you should be paying regular amounts off any credit card debt you have. For some useful tips on how to reduce your credit card debt faster check out our earlier article.

Managing Credit Card Debt

At first glance, many of the balance transfer offers sound too good to resist. There are the enticing offers of 0% balance transfers and even low rate balance transfers for the life of the balance. There is a downside though.

With a credit card you only need to pay the minimum balance every month. By doing this there is no way you will clear your existing debt any time soon. You many also use the credit card for new purchases. Keep in mind that the interest rate for any new purchases is likely to be a variable rate and usually much higher. Also, any money you pay off your card will be paid off your existing balance transfer debt first, whilst your new purchases will be accumulating and attracting a higher rate of interest.

In my opinion, a balance transfer credit card should be used only to clear debt and not be used for making new purchases. You should also plan to pay off more than the minimum monthly payment. If you have the discipline to stick to this, then a balance transfer offer will probably be your best choice.

If you need to reduce any further temptation of getting into debt with a new credit card, then the best option for you would be a personal loan. A personal loan offers you a fixed rate of interest over a period of time and is probably the more sensible and less expensive option to clearing your existing debt.

For more information on balance transfers and reducing credit card debt check out our earlier articles:

Balance Transfers – know what you’re getting into!

Managing Credit Card Debt

There are many advantages to owning a credit card including online payments, no need to carry cash around and having credit available for large purchases. However, there are also many pitfalls which you need to be aware of.

Before applying, or when you receive your credit card, you need to thoroughly read thru your contact and the terms and conditions.

Make yourself aware of the penalties and additional fees for things such as late payments and exceeding your credit limit.

Being aware of the consequences can help you to stay in control and avoid getting into the credit card debt cycle.

The most important things are to:

• be aware of your credit limit
• pay your bills on or before the due date
• understand the interest free period
• pay at least the minimum monthly balance each month

Choose an appropriate credit card and take into account interest rate and annual fees and balance transfer rates.

By understanding the penalties of your credit card and the terms and conditions you can use your credit card to its full advantage without falling victim to credit card debt. For further information check out our credit card tips and learn how to manage your credit cards wisely.

There are certain things you need to be aware of to avoid some of the pitfalls.

Winning ways with your credit card
Pay off your balance in full – If you can, always pay off your balance in full each month. This way you will avoid all interest charges.

Use a Reward Credit Card – If you can pay off your balance in full and avoid paying in interest on your spending then you are in a great position to benefit from a rewards credit card. Reward credit cards offer all types of rewards which will definitely put you ahead of the game.

Consolidate your debts with a good balance transfer offer – If you combine your credit card balances into one, making use of a balance transfer, you will avoid interest on your debt for up to 12 months. This will give you a good deal of time to getting the debt cleared without paying interest.

Ways to avoid being a credit card loser

Paying Minimum Payment Only – If you regularly only pay the minimum montly repayments, you will be paying a high amount of interest on your purchases. This is probably one of the most important tips to avoid extra changes.

Avoid Spending on your Balance Transfer Cards – If you have consolidated your debts into a balance transfer card, then you should not use this credit card for spending. All your repayments will go towards clearing the balance transfer debt first. This means that any new purchases will be charge at regular interest rate. Any new purchases will start to accumulate and interest charged at a much higher rate. If you do transfer your balances, make sure you have a good low rate credit card for your everyday purchases.

Avoid Unnecessary Fees – Even if you don’t pay off your balance in full each month, make sure that you at least make your payment on time. This will ensure you are not changed a late payment fee. Be aware of your credit limit. Try not to exceed your limit or you may be charged an extra fee also.

Everyday Spending – Try to only use your credit card for expenses that you know you can afford. Many consumers use credit cards as a ways to live from payday to payday and never catch up. Try to avoid spending beyond your means.

By following these simple steps, we can learn how to use our credit cards wisely. We can avoid unnecessary charges and hopefully avoid becoming a victim of credit card debt.

There are two ways to join Simple Savings:

Option 1:
You can join simple savings as a free member and receive weekly email savings tips and much more.

Option 2:
For a joinging fee of only $49, you can access the Savings Vault.

“Your first visit to the Vault will blow you away. It is a staggering source of information, containing thousands of tips that will save you money and new tips are constantly being added. Finding what you want in the Vault is easy, thanks to our impressive facilities. Most Vault members learn enough to recoup their $47 joining fee in the first week alone – or even the first visit!”
www.simplesavings.com.au

So what are you waiting for. Either sign up for free membership or join the Savings Vault and start reducing your debt faster.

Our handy online credit card calculator can provide you with the help you need. It makes it clear to see where you are headed and the difference even $20 per week extra can make to your balance.

Check out your existing card and compare it with the best deals on the market. Credit card comparison is a great way to make sure you’re getting the best from your credit card. Remember, the people who are most sucessful at clearing their debts are the ones who set goals.