The chances are you have either just received, or are about to receive your credit card statement following Christmas and New Year’s. Many people during this time will experience significant bill shock as they realise just how much money they have spent, and as such may find themselves in a credit card debt they are unable to pay back.
Many people will be looking for debt help as a way to deal with their credit card overspend. An interesting fact you might not know is that the average debt per person is $4,263.87. That’s a lot of debt!
Why is this such a big deal?
Credit card debt, in my opinion, is one of the worst kinds of debts you can have. They charge one of the highest interest rates, and generally the money you have borrowed isn’t even for worthwhile purchases, like a house, car etc. It is for our wants and desires, things we know we can live without but we choose not to.
Don’t get me wrong, I have definitely used my credit card one too many times to pay for things I didn’t need.
To give you an idea of the real costs of credit cards, below is an example:
You spent $3,000 over Christmas and New Years on put this on your Credit Card. You can only afford minimum repayments, and your card has an interest rate of 24.99%.
This $3,000 spend will actually cost you $11,822
That’s $8,822 in interest, and it will take you 26 years and 9 months to pay off! That’s a lot of extra money you are spending on stuff you don’t need.
To help you get out of credit card debt, we have come up with the four steps to beating credit card debt.
Step one: Make a budget
We preach this one a lot at Debt Cutter, but that’s because it is true. The most important thing you have to do to begin to get out of credit card debt, or any debt, is to make a budget.
We’ve already put together a step by step guide on how to make a budget in a recent post here.
Making a budget is the easiest way to assess why you got into debt, how you will get out of debt, and more importantly if you are on track to get into any more debt throughout the year.
(Insert budget download image)
Step two: Cut the cards
More a symbolic step then anything, actually cut up your credit cards, don’t put them away in a draw, or freeze them in ice. Actually cut them up!
The benefit of this, is you actually cannot spend any more money on your credit card. This is an important step as you are strengthening your resolve to get debt help and back on track with your finances.
Step three: Ask for help
If you have done the above two steps, but you cannot keep up with your repayments, on top of all your other debts and expenses it may be take to get debt help. Even if you can make the repayments, sometimes you will just need someone to talk to, to ensure you are making the right decisions to get out of debt faster.
Sometimes your finances get out of control, and you need an independent third party to help you get out of debt.
If you do have the ability to get yourself back on track, make sure you are following your budget so you can get out of debt sooner. By the time the debt is paid off, the chances are you will be so used to working to a budget it will become second nature to follow.
Step four: freedom!
I think you will agree the fourth, and final step, is the best. Freedom!
By either sticking to a plan or getting help you will begin to see your credit card bill go down. The relief you will feel when your credit card is finally paid off, will be worth the sacrifice.
This blog is part 5 of our New Year’s series. To read our other blogs click below:
Part 1: Making the right resolution
Part 2: New Year New Year – budgeting guide
Part 3: The 52 week money challenge
Part 4: How to save $1000’s every year
Brand & Communications Manager
Elise is passionate about finance, and is on a mission to explore and share different tactics for tackling the everyday financial challenges in realistic and achievable ways. With a background in communications, digital marketing, and public relations, Elise uses her skills to generate new ideas and content to help make finance fun.