Some may say Australia’s relationship with credit cards is one of those poisonous relationships that you just can't let go of.
Despite high interest rates and tough economic times, Australia's addiction for credit cards is more evident than ever.
Currently, Australian households collectively owed banks a total of $32.1 billion in credit card debt, according to Australia Prudential Regulation Authority data. Per credit card holder, this averages out to $4,364 and the interest paid on that amount is $734.
While we may want it to, the reality is that this debt is not going to disappear on its own and you will have to pay it off eventually. What a lot of people avoid thinking about is that the longer you leave the debt the more you will pay in interest and the harder it will be to pay off in the long run.
If you are facing a large debt don't despair, there are some methods to help you find financial freedom and possibly save money at the same time:
Pay more than the minimum repayment
The average amount that financial institutions charge for minimum repayments is approximately 2 percent of the total balance owing. By only paying the minimum repayment each month it could potentially take you decades to pay off your starting balance and add thousands in interest.
For example, if you have a credit card debt of $7,000 at an interest rate of 17.99 percent per annum, it will take you more than 50 years to pay back your debt if you repay the 2 percent minimum. However, if you could pay $300 off the balance each month you, it will take you less than two and a half years to pay off not to mention the $16,000 dollars you will save in interest.
Consider a balance transfer
If you are struggling to pay off your current balance or want to be credit free sooner, you should consider applying for a balance transfer credit card. Over half the cards on the market currently offer a zero per cent interest intro deal for a specified time frame that can help you get on top of credit card debt.
For example, by transferring your balance of $10,000 at 17.99 percent to a zero percent balance rate you can save about $400 in interest in six months. That’s money straight back in your pocket that won’t be wasted on interest repayments.