How To Tackle Credit Card Debt – Starting Fresh For The New Year
Do you want to turn over a new leaf when it comes to credit card debt? Well, now is as good of a time as any! Having credit card debt hanging over your head is never a good feeling. Why then, should you let it control your life?
The new year is a perfect time to get credit card debt under control for good! And, it could be easier than you think. Although it may seem overwhelming, you can do it by following a few simple steps. It will take discipline though…
What’s Causing The Problem?
Most of the time, multiple credit cards can be the root of debt problems. All of these credit cards are for different amounts with different interest rates- and, that is where the problem starts. Put simply, more cards equal more stress. So, it’s time to get rid of those cards and the stress that comes with them! After all, there’s so much more to life than worrying about debt.
How Much Debt Do You Really Have?
If you want to kick credit card debt to the curb, it’s important you actually know how much you have. We recommend you sit down and crunch the numbers. Gather all the information and put it down on paper… this can often be a wake-up call and the motivation you might need. Once you have started to reduce the debt, it may be a good idea to keep a tally to remind yourself.
Keep Up The Repayments
It’s absolutely vital that you keep up with the monthly repayments on your loan. Pay off as much as you can every month, this will reduce the interest on the card. It is essential that you make at least the basic monthly repayment(s) or you could be stung with late/default fees that can compile very quickly.
If you have a direct debit set up it is very important you make sure the money is in the account when payment is due. Generally, if a direct debit is unsuccessful, a default fee will be automatically added to your account. Annoying, we know… but don’t make it more stressful than it needs to be. Even if it means putting a reminder on your phone!
Prioritise Your Debts
If you have multiple debts, it’s important you start settling them one-by-one. It can, however, be difficult to know which debts to prioritise. If this sounds familiar to you, this is what we recommend:
The Card With Highest Interest Rate
If you’re wondering which card you should focus on repaying first, we suggest the one with the highest interest rate. The long and short of it is that this one is costing you the most – so, let’s get it out of the way.
If you’re able to pay more than the minimum amount on the card with the highest interest rate, we recommend you do it. Once you have that one out of the way you’ll be able to shift your focus to the next card.
It is, however, extremely important that you keep up all minimum payments on other cards whilst you are paying this one off – you don’t want late fees compounding!
The Smallest Debt
Another great place to start is focussing on your smallest credit card debt. It’s important to continue making minimum repayments on all of your other cards. But, if you can pay more than the minimum amount of the smaller debts then we suggest you do so.
When you’ve paid off your smallest debt, we recommend you move onto the next card with the smallest amount to repay… and so on.
Cash Account Only
If you’re trying to banish credit card debt for good, then we recommend you pay for all (that’s right everything) expenses on your cash account. It’s never a good idea to add to the problem whilst you’re trying to resolve it. Therefore, it might be a good idea to look at getting a debit card.
Take Care Of The Important Stuff
When you get your salary, we recommend you take care of the most important expenses first. That means to pay for the essentials like rent, food, electricity, phone bill, insurance etc.
We totally understand how challenging it can be to hold back on the more exciting expenses – often this is how credit card debt starts in the first place. If you follow this strategy, however, it could reduce the chances that you will fall short and have to rely on credit cards. It is often a good idea to set up direct debits for regular payments so you don’t have to think about it.
Have A Look At Your Savings
We know, we know – the last thing you want to do is spend all of your savings on paying off a credit card. But, it might be the best option.
Think of it this way; the interest on your cash when it is just sitting in the bank is far less than the interest your credit card could be currently accruing. It’s definitely worth thinking about.
Sometimes it’s safer to take care of the bills and have a clean slate. The last thing you want to end up with is a bad credit rating. Jacaranda Finance could even provide a bad credit loan.
Cut Out The Unnecessary
We all have different expenses. Some of us spend more on food, whilst others don’t see the value in spending double the amount on things like organic vegetables. Whatever you spend your salary on, when you’re trying to eliminate credit card debt, it is important to cut out the unnecessaries.
Take a serious look at what you could go without – because odds are there is probably something. It might be difficult to cut down on the things you love, however, in the long run, you will thank yourself.
Budget, Budget, Budget!
The best way to avoid falling short and having to rely on a credit card is to budget! Plan for your regular expenses such as food, rent, petrol, electricity etc.
If you plan right, there is less room for surprises and you should always have enough cash to cover yourself. It is also a good idea to put aside a little extra cash for emergencies. As well as covering for the boring stuff, it’s important to ensure you have a little bit of cash left over to spend on yourself.
Budget for fun money, that way you won’t have to rely on credit. It can help to have your budget written down in a place where you are able to see it.
Shut It Down
Once you’ve paid off a card, shut it down! Contact the bank and have them close the account completely. It can be easy to slip into old habits so it’s best to eliminate the temptation altogether.
The scary part is if you don’t shut the account down properly you could still be incurring fees and charges – even if you don’t use the card anymore! However, the good news is – from January 1, 2019, all credit card providers are legally obliged to give you the option to shut down your card online.
Consolidate Your Debts
Sometimes the debts just get too much. If you feel like your drowning in way too many repayments, consolidating your debt might be a good idea. What is debt consolidation? Well essentially, consolidating your debt means turning lots of little repayments into one larger repayment.
There are two logical reasons why debt consolidation might be a good idea for you. Number one is the fact that it is much, much simpler to pay off one debt rather than multiple. Secondly, the interest on a debt consolidation loan might be lower – personal loans for debt consolidation are often a good way to go in this case.
Regardless, it is always a good idea to seek advice from a professional before making any financial decisions.
Don’t Get Overwhelmed
It is so important not to get overwhelmed. We know how easy it can be to look at debt and get the feeling you’ll never be free of it. But, it’s all in the execution. Planning is key!
If you know how you’re going to go about it, banishing credit card debt can be a lot easier. Make a plan and stick to it. It can be a helpful reminder when your plan is written down somewhere that you can see it every day. Remember to plan on paying more than the bare minimum on the higher interest cards – if you can. Trust us – when you see the balance on your credit card debt shrinking you’ll thank yourself. There’s no better feeling than getting your bills under control!
Tackling credit card debt is not impossible, it just takes planning and commitment. Like anything good, it is never easy. But, you can do it! And, you’ll be happier for it…
Small Personal Loan
Up to 20% Establishment Fee
+ monthly fee up to 4%
Jacaranda Finance does not charge an annual interest rate on SACC loans. These small amount loans incur 'fees' instead of interest. The maximum comparison rate on our loans between $300 and $2000 is 199.43%.WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate
Loan Amount of $1,000 over 6 months repayable weekly (25 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $240 (fees based on 4% per month over 25 weeks) = $1,440 total repayable in 25 weekly installments of $57.60.
Loan Amount of $1,000 over 12 months repayable weekly (50 weekly repayments). $1,000 (Principal Amount) + $200 (20% Establishment Fee) + $480 (fees based on 4% per month over 50 weeks) = $1,680 total repayable in 50 weekly installments of $33.60.
Medium Personal Loan
Annual Percentage Rate (APR) starts at 20.56%
Comparison Rate is 20.56% per annum.
This comparison rate is based on a medium amount credit contract of $2,500 repaid over 2 years with a $400 establishment fee and APR of 20.56%.WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate
Loan Amount of $3,000 over 18 months repayable weekly (78 weekly repayments). $3,000 (Principle Amount) + $400 (Establishment Fee) + $555.83 (reducing interest*) = $3955.83 total repayable over 18 months with weekly installments of $50.71.
Loan Amount of $4,500 over 24 months repayable weekly (104 weekly repayments). $4,500 (Principle Amount) + $400 (Establishment Fee) + $1081.85 (reducing interest*) = $5981.85 total repayable over 24 months with weekly installments of $57.51
Large Personal Loan
Annual Percentage Rate (APR) is 12%
Comparison rate is 19.88% per annum.
Loan Amount of $5,000 over 18 months repayable weekly (78 weekly repayments). $5,000 (Principle Amount) + $1831.16 (Interest) = $6831.16 total repayable over 18 months with weekly installments of $87.57.
Loan Amount of $10,000 over 24 months repayable weekly (104 weekly repayments). $10,000 (Principle Amount) + $5041.72 (Interest) = $15041.72 total repayable over 24 months with weekly installments of $144.63.