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Credit Management Guide
Getting into debt by using credit cards, taking out home or personal loans and engaging in other financial arrangements with high rates of interest is easy to do. Buying clothes, groceries and paying utility bills on credit is common, as people tend to now carry less and less cash with them. According to the Reserve Bank, Australians are more than $26 billion in credit debt. Scary stuff!
People who are savvy at credit management, pay off their full credit card balances every month, but there is a significant number of consumers who simply make a minimum payment and suffer with the annual interest charges, which could be 15-18% per cent. At the minimum payment level it would take several years to pay off a card debt even with a balance of only a few thousand dollars, when the interest incurred along the way is coupled with the original purchases.
Managing your credit is an important step to ensuring that you minimize your debt and keep under control. Here are some key tips to doing exactly that:
• Increase your repayments - if your repayment is $50 a week, see if you can find it in your budget to pay $55 a week - by paying $5 extra per week you will be making an additional $260 repayments annually.
• Make repayments (and any extra payments you can afford) off the card or loan with the highest interest rate as a first priority. Get the outstanding balance down as much as you can (a small balance of $500 is usually manageable) and then move onto paying off the next card or loan.
• Consolidate your debts by merging all of your cards into the card that has the lowest interest rate. Then cut up the rest.
• Consolidate all of your debts into your mortgage or home loan. If you have enough equity in your home - that is if you owe less than 80 per cent of total value - you could roll all of your existing card and personal loan debts into your home loan. This mean you only need to make one repayment per month.
