Credit Card Debt

Released: 13 Aug 2010

In a recent speech made by the Reserve Bank of Australia (RBA) Deputy Governor, in June 2010, Ric Battellino raised the question “are Australian households over geared”? Following this question he states that household debt has risen significantly faster than household income since the early 1990’s.

RBA figures indicate the average personal credit card debt is approximately $3,300. With credit card interest rates heading towards 20% or more, people with a large balance are facing very high repayment amounts. If only paying the minimum payment, this could take six or more years to pay off.

If you are struggling with paying off your debt then take control of the situation today. Even if you feel completely hopeless, you do have options. Once you start taking simple baby steps you’ll feel more in control of your finances.

Try some of these helpful tips below;

• Take time to analyse your income & expenses. Do a budget by visiting FIDO’s budget planner. It is so important to track your spending so you get an understanding where your money is going.
• Distinguish between what you ‘want’ and what you ‘need’. Cut down or cut out altogether on what you ‘want’. Making sure you spend less than you earn should provide more money to repay your debts. 
• Make short term and long term goals. Short term goals will keep you motivated and help you achieve your long term goals.
• You may consider selling some household items you no longer need. Have a garage sale or use Ebay to sell those unwanted items. If necessary sell down some investments to pay off high interest debt. There is no point having money in the bank earning little interest and a debt carrying a higher interest. 
• Research credit card deals. You can compare credit card features and interest rates visiting www.ratecity.com.au. By switching over to the right deal may lower your interest rate and therefore pay off your credit card debt faster. 
• Consolidate all your credit cards if you have more than one card. Try to switch to a credit card that provides balance transfers and discounted or nil interest rates for the first six months. 
• If you cannot consolidate debt then start paying off the card that has the highest interest rate first. Tackle one debt at a time. Once a credit card is paid off, consider closing the account. 
• Don’t fall into the trap of continuing to use a card with high interest rates just because it carries a reward program. Often the extra interest you pay negates any benefit from receiving the rewards. 
• Learn how to pay “cash” for your purchases and not the credit card. Alternatively set up a debit visa card, that way you need to have cash in the account before you are able to purchase.

To get further information contact us on (08) 8333 2488.