Power Tips to Reduce Your Credit Card Debt

Paying off credit card debt can be a long and overwhelming goal, not to mention stressful. Despite efforts to take charge of your finances and monitor your spending, you might still find yourself struggling to reduce your credit card debt because of your card’s high interest rate. This makes paying off credit card debt an even bigger struggle.You don’t need to despair or stay in the pit of credit card debts. There are plenty of things you can do to fast track your debt elimination. Below are some power tips you can employ to help you reduce your debt.

1)    Transfer your balance. There are credit card companies that offer a very low interest rate for balances you transfer to them from other credit card companies. Interest rates can be as low as 0% to 3% and vary in duration from 3 months to 6 months. Simply contact one of the credit card companies that has this special offer and apply for a credit card through them.

2)    Negotiate with your credit card company. Competition always favours the customer. Contact your existing credit card company and inform them that you have been offered a special deal from another credit card company. Let your credit provider know that you are calling to give them an opportunity to match the deal before you finalise your new credit card and transfer your credit card balance to the new provider. Your bank will typically transfer you to the “customer retention” team and within five minutes you will have a reduced credit card interest rate for 6 – 12 months. (Yipeee)

3)    Increase repayments. Another option is to increase your repayments. A good way to do this is to have 10% of your total income automatically transferred to a different account each pay day. As a rule of thumb transfer 5% onto credit card debt and the other 5% to your rewards account.

4)    If you can’t increase your repayments, but do reduce the interest rate (Tip Number 2 ), then maintaining the existing repayments will have the same effect because more of the repayment will now be going towards the principal debt as interest charges will be lower. Of course the double whammy is ideal – lower your interest rates and increase your repayments!

What to do when your low interest rate period expires

1)      Again, never hesitate to ask your bank for another interest rate reduction. Tell them that you are transferring to another bank with a better offer.

2)      Transfer your balance to a competing credit card provider offering a 0% to 3% interest rate for credit card balance transfers

Bonus tip
Bad habits are hard to break. If you have been in a vicious cycle of turning to your credit cards to fill financial gaps in your spending, it is likely that you will eventually succumb to the temptation of leaning on that “spare emergency credit card” that you have in the back of your wallet. Rather than falling into the trap and owning multiple maxed out credit cards, I recommend that you cancel the credit card from your previous bank as soon as the new lower interest rate credit card application has been accepted by a new provider. Another way to help prevent a slip up is to take the credit card out of your purse or wallet. If it’s buried safely in a drawer somewhere it’s less likely to get used in the “heat of the moment”. It is just like weaning off coffee or sugar— the more healthful habits we integrate into our life, the easier to let go of the bad ones.

Like everything else in life, congratulate yourself and acknowledge your successes and forgive yourself for any little slip-ups along the way. As long as you are moving toward the goal and not away from it, you are winning – so celebrate yourself.