If you are one of those people struggling to stay on top of credit card debt, read on for some tips to quickly pay them off and get one step closer towards financial stability.

As of 2018, there are more than 16 million credit cards all throughout Australia. It has been around three years since that statistic was published, so the number has definitely gone up since then. That amount translates to over $33 billion in interest debt!

Why are so many Australians riddled with so much debt? Well, one of the easy answers to that is a lack of savings. Since people do not have a savings fund that they can regularly rely on, they have to accrue debt to spend on various stuff. A considerable portion of their earnings goes towards paying off this debt, along with the interest that comes with it.

Eventually, the salary just can’t keep up with the payments, so some people have to accrue more debt in order to pay off past debts. Additionally, credit cards are marketed to consumers so heavily as if it was an essential good, all in order to get people to keep spending.

Most people tend to see a credit card as extra money, but this kind of thinking just reinforces the debt cycle, leaving people riddled in debt for most of their lives.

If you are one of those people struggling to stay on top of credit card debt, read on for some tips to quickly pay them off and get one step closer towards financial stability.

Know the Avalanche and the Snowball Methods

The avalanche and snowball methods are well-known ways for managing credit card debt, and it applies especially to those of you who have multiple credit cards.

In both methods, you allocate money towards paying off the minimum for all your cards. With the avalanche method, the remainder is then used to pay off the highest interest debt. That way, the amount of interest you pay over time eventually gets reduced because of this prioritization method.

On the other hand, the snowball method uses the remainder after paying the minimum amounts towards paying off the debt with the lowest balance first. That way, you get some peace of mind knowing that the number of your debts has been reduced, regardless of how much the monetary amount of the debts actually are.

No method is superior to the other. You will have to choose which among them are more suited to your lifestyle and which method will give you more stability and management. 

Will you be more at ease knowing that you are taking care of higher interest rates first, even if you have to stay on top of multiple card debts? Or do you prefer reducing the number of cards with debt? It all depends on your preference.

Pay Off Your Card in Full Every Month

Whenever you are unable to pay off your card’s principal amount, the remainder gets charged interest. The remaining payable with interest also gets charged with interest when you can’t pay it in full. Thus, you pay interest on the principal, and you also pay interest on the interest.

Knowing this fundamental principle, you should always embrace the mindset of only using your card for purchases that you are able to pay off every month.

That way, you can avoid paying interest and avoid having your credit card debts keep stacking every month.

If you keep on paying only the minimum payable amount on your credit card, your dues will eventually skyrocket out of control.

The lesson here is that you should always read the terms and conditions of your credit cards, especially the provisions on interest. Knowing how your payables add up is crucial in maintaining control over your credit card debt.

Trim Your Lifestyle

One of the most essential pieces of advice on financial stability is to “live below your means.” That means the cost of your lifestyle should be less, not equal to, how much you make in your job.

The reason for it being less is that you always want to have a buffer for savings and other emergencies. If you spend as much as you make, you will always be living paycheck to paycheck, and you will be one missed paycheck away from frantically looking for your next meal.

Additionally, by living below your means, you are also ensuring that you do not have to incur more debt just to keep up your lifestyle. This is especially crucial for you if you are already in debt.

By trimming your lifestyle down to more manageable levels, you can allocate more of your money towards paying off your debts.

Know and Use D.E.B.T.

D.E.B.T. is a payoff plan made by Marcus Garrett, and it consists of multiple steps that involve your mindset more than anything else.

D stands for “Define the Problem.” Before you do any action at all, the first thing you should be doing is knowing what the problem is. Does it have to do with your spending habits? If so, you might want to look into your bank statements and other spending trackers and look at what is causing you to get into so much debt.

E stands for “Establish a Plan.” Now that you know what the problem is, you need to map out a plan to address it. In this case, your goal is to get rid of your credit card debt. You can look up a debt calculator and compute how much you will need to pay for the next few years, or you can get in touch with a debt specialist to help you tackle the problem.

B stands for “Budget.” You have a plan now, so the next step is to budget for it. You can’t really execute a financial plan without money to back it up, so start allocating some money for debt payment. One of the more straightforward rules is the 50/30/20 budget rule, which says that you spend 50% of your income on needs, 30% on wants, and 20% on debt payments. If you can, you can try tweaking the allocation and spending 30% on debt payments and 20% on wants.

Finally, T stands for “Trust the Process.” Essentially, you just have to trust that your plan will carry you through all the way to the end. You will encounter some hiccups throughout, and maybe you might not even make some payments here and there. But the most important thing is to just stick to your plan and trust that it will be enough to get you to your goal.

Conclusion

Credit card debt is an all-too-common problem for Australians, and for most of them, the root cause can be pinpointed as bad financial habits. 

Maybe you used to make more money than you are making now, but when you had a salary cut, your lifestyle did not make the corresponding adjustment. Or maybe you don’t have a habit of tracking your expenses, which causes surprise and worry when you wonder where your money went every month.

The first step in handling and managing credit card debt is always to be in control of your own lifestyle. Credit cards can be an excellent tool for achieving financial independence, but they can also bring about financial ruin if not appropriately managed. Like most tools, the usefulness of credit cards is dependent on the one using them.

Take control of your lifestyle and pay off your credit card debts; before long, you will soon be financially independent as well.