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With consumer credit card debt at an all time high- in fact, according to the Reserve Bank of Australia, the country has the highest consumer debt to disposable income ratio in the world- people are desperately searching for ways to relieve their wallets of their financial burdens. The average credit card holder has over $3,000 in personal debt. This is unsustainable for many people, and causes not only economic woes within the household, but psychological and emotional trauma for the individual. In order to get out and stay out of debt, there are a few simple steps you can incorporate into your daily spending and saving habits, allowing you to be free of the credit card monster once and for all.
Say Goodbye to the Plastic
This may seem somewhat obvious, but the easiest way to cut down on credit card debt and overwhelming interest payments is to stop using the credit card! With so many families in financial turmoil, it has become a common practice to resort to the plastic for even the most basic of all necessities. As difficult as it may be initially, slowly easing away from credit cards is the only way to fully wean yourself off of the power of plastic for good. To put a stop to impulsive purchases, leave the card at home and only carry around cash. Studies have proven that people are more conscious of the depletion of funds when using cash, rather than simply swiping a credit card for your every whim and desire.
Switch Cards
With interest accounting for more than the initial purchase price of the item, it’s important to find a credit card with a lower interest rate than the one you have now. The lower the interest rate, the less interest you’ll be paying, which means the final amount you eventually end up paying will be much less than the original amount you would’ve had with your old card. For example, a simple balance transfer from a card with interest around 25% to 18% can save you a bundle of money, especially on a card that holds a high level of debt. There are sites online that allow you to perform real-time comparisons. Along with Credit Cards, you can compare health insurance and other stuff too!
Pay off the Highest Interest-Bearing Card
If you have multiple cards, find the one with the highest monthly interest rate and pay that one off as soon as possible. Interest doesn’t actually go towards the purchase price of the item, so the least amount of it you have to pay, the better. Pay the minimum balance on the rest of your cards until the high interest one is paid off, then move on to the next highest-interest card until you’re completely paid off on all your cards.
Revamp Your Budget
When you’re struggling with personal debt, getting rid of that burden should be your highest priority. Take a peek at your budget. Is there anywhere you can cut back, even if it’s just $10 or $20? Every little bit counts, and the more you can chip away from your budget and add to credit card payments, the better. It’ll be difficult cutting out some of your entertainment or “fun” expenses, but think of it as short term pains for long term benefits.
Debit Cards = Your New Friend
Debit cards work just like credit cards, except they immediately deduct funds from your account at the time of purchase. This means that, if the money isn’t there in your account, you can’t have what you’re looking to buy. There is no interest involved, no monthly payments, and no debt spiraling out of control from month to month.
Drowning in debt creates many problems, from financial instability to even strains in family and friend relationships. However, getting out of debt is important for people looking for greater security in their lives. Once all of your credit cards are paid off, beware the temptation to turn back to credit cards as means to get the things you want most. Learn to restrain yourself from spending by asking yourself if you really need that item in your hand, or can it wait? Better yet, create a savings account and make regular monthly deposits into it with money you would have otherwise splurged on unnecessary luxuries. You will not only be debt free- and thus, have a better credit score- but you will have back-up funds available in case of a future emergency. Without debt plaguing your life, you will be happier, healthier, and financially better-off.
