With 16.7 million credit cards in circulation in Australia and more than $24 billion spent every month by consumers using this form of plastic, it’s not difficult to see why a significant number of people find themselves in ever-increasing levels of debt.
It’s all well and good if you are able to clear that financial burden each month or over the specified repayment period. But that’s not always the case as the $32 billion of accrued debt that is sitting on our collective credit cards testifies. And that’s an awful lot of wasted money in interest payments.
In fact, that equates to $734 per year for every credit card holder based on an average debt of $4,267, according to the consumer finance regulator, the Australian Securities and Investments Commission.
As well as spending big on items that we can’t normally afford to pay off in one go, many people get into difficulty because they spread their spending over two or more credit cards. All of a sudden, seemingly small sums of credit card debt become one large financial headache.
Quite often, you will find you are paying higher rates of interest across a number of cards and also incurring additional fees, especially if you miss a payment or are unable to keep track of what you are looking to repay. That balancing act can literally trip you up
Wasted money in interest payment equates to $734 per year for every credit card holder based on an average debt of $4,267, according to the consumer finance regulator, the Australian Securities and Investments Commission.
That’s where debt consolidation comes in. By consolidating these different amounts of debt into one amount and then paying back it through one loan - in this case a personal loan - could save you hundreds, if not thousands, of dollars in lower interest rates through one regular, fortnightly or monthly, repayment at a fixed amount over a fixed period.
That way, you know exactly what you need to pay, when and, equally important, at what time over the life of the loan you take out you will be able to clear your debt. That will be a far better option than getting yourself into deeper debt every time you don’t clear what’s on your credit card or cards.
So, what do you need to do? First, work out exactly how much you owe on your card or cards. Next, look at how much you are paying in interest on each individual debt and the monthly fees you may be paying. All of that information is on your credit card statements. Remember to also look at the possible break costs of getting out of those cards.
After that, calculate the amount of money you have coming in each month, what you are spending it on and what you can afford on a monthly basis to use to pay off a potential loan through which you will consolidate the debt on your credit cards. Be realistic! Pay what you can really afford, not what could leave you short and therefore tempt you to put more money on a card to get by.
From there you will be able to work out your best option to start clearing the burden hanging over you at the same time as empowering you to take back control over your finances.
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