There’s no denying it, we Australians are hooked on credit cards. There are more than 16 million credit card accounts in Australia, each with an average debt of around $3000—and many of us have more than one credit card. So if you have credit card debt that you just can’t seem to shake it’s important to take some action to help you get rid of your debt and get your finances back on track. Our Financial Advisers in Sydney share our top 5 steps to help you escape credit card debt.

Step 1 Stop Spending!
This may not be rocket science but this can be a difficult step for many people. Credit cards are designed to get you hooked on the idea of having something now and worrying about paying for it later. It’s all too easy to swipe that card and those purchases can add up to a huge bill at the end of the month. To stop getting yourself in any more debt it is very important that you stop using your credit cards until you can get your debts under control. Take your credit cards out of your wallet and put them in a place where you can’t easily access them, or better still cut them up! Using EFTPOS and cash is the best way to control your future spending as you’ll be using your own funds and not relying on credit. You’re more likely to ask yourself whether you can really afford those shoes if you see that you’ve only got $35 in your bank account to last you the rest of the week. Remember that if you use your credit cards to pay bills via direct debit that you’ll need to call providers to make other arrangements. Consider using facilities such as BPay instead.

Step 2 Face the Music
As difficult (and depressing!) as it may be, you need to get a clear picture of just how much debt you’re in to allow you to take action. Sit down and make a list of all your debts. Make sure you include ALL your credit cards and store cars, as well as any other personal loans. List the current outstanding balances and the interest rate being charged on that amount. Sort your list in order from the ones with the highest interest rate to the ones with the lowest interest rate.

3 Which Debt Do I Pay Off First?
When you have multiple debts it can be really difficult trying to juggle them all and making payments. Take note of the debt #1 on your list (the debt with the highest interest rate). This is your highest priority debt as this is costing you the most in interest. Where you have spare cash you should focus on paying down this debt. Once you have paid off this debt, then move on to focusing on debt #2 in the list and so on. This method helps you to save the most money in interest by reducing the amount you owe on the highest interest earning debt….

(Want to read the rest of this article? For more top credit card debt reduction tips read our free Winter 2011 Financial Planning Newsletter)


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