Credit Cards - The Cycle of Debt

Staying out of debt - It is possible

Using credit is risky, but if you use your card wisely, you can avoid getting yourself into serious debt. The following points can be used as a guide to staying out of debt:

• Be wary of the interest free days on your card. The actual time you have to purchase goods interest free is shorter than the advertised period.


• Pay your outstanding balance on-time. It may seem obvious but this way you avoid interest all together and you are not giving money away to the bank. Utilise your bank’s online facilities to check statement dates and amounts owing. By the time your statement arrives in the mail, you are left with only a few days to pay.


• Pay attention to introductory or honeymoon period offers. Knowing when it expires and the rate a card reverts to after this period is important. It could be easy to slip your mind and keep purchasing when you’re actually paying at a rate of 17.50% not the initial 6.99% for example.


• Spend wisely. If you don’t need that new stereo system, don’t buy it with your card. Paying by cash later on is safer.


• Develop a solid credit history. By paying goods and services off regularly, you will maintain a good credit rating. Something that is essential if you wish to take out a loan for a house for instance. If you only pay your electricity bill or phone bill on your credit card, you can earn a good credit rating because these are regular costs that you would have to pay for anyway.

I’m in financial trouble – how can I get out?

If you find yourself behind in credit card repayments, there are a number of steps you can take to get you back in the black.

• Changing lenders and taking advantage of an introductory offer. Most institutions offer a low interest balance transfer, which is for a specified period click here to find out more about special introductory periods.


• Call your bank or institution if you are in trouble. The early the better too. Some cards have accident insurance where the bank will pay out your remaining balance if you become sick or injured. If not, they may be able to work out a repayment schedule with you.


• Drawing up a budget can let you see where your expenses are and how you can curb them. A simple plan that breaks up your essential costs like food & electricity and non-essential items like entertainment is the best way to get you back on track. Cut back on your non-essential spending and you will have more money to put towards the debt.


• Tap into your savings account to quickly settle your high interest debts if possible.


• Contact a counselling service in your area. They have trained professionals who can help you work through you financial worries. The Australian Financial Counselling & Credit Reform Association is a good starting point for seeking help with money.