ASIC estimates Australia’s credit card debt currently stands at $37.5 billion, which means around $6.4 billion is paid out each year in interest on that debt. That also means the average credit card holder is in debt to the tune of $4857, and is paying out $832 each year just in interest.
Having a credit card doesn’t mean you have to pay out hundreds in interest each year. Being smart about the way you use your credit card could mean you pay no interest at all – and you could keep those extra hundreds in your pocket, where they belong.
Balance Transfer Credit Cards
If you have credit card debt, then the first thing to think about is how you’re going to pay it off. One way to get a head start on paying off credit card debt is with a balance transfer credit card. By transferring the balance of your existing credit card onto a balance transfer card, you will pay less interest, and can start paying off more of your debt. Try to choose a card that offers the lowest interest rate for the longest period of time, and always know what happens when the offer ends.
There is a wide range of introductory offers available on new credit cards – not just balance transfer offers. If you want to save on interest, check out cards with intro offers on purchases. With this type of card, you will pay low or no interest on purchases for a certain period of time. As with balance transfer offers, be sure to pay off your debt before the offer ends, and know exactly what happens when it does.
Low Interest Credit Cards
Once you have paid off your credit card debt, it can be a good idea to keep a low interest credit card. They don’t always have the bells and whistles – such as rewards points and complimentary insurances – but they are usually a cheaper way of getting credit. Especially if you tend to carry a balance month-to-month.
Interest Free Periods
Some credit cards offer interest free periods on purchases. This may mean you can benefit from up to 44 or 55 days interest free on purchases, depending on the card. This can be a great way of saving money on interest if you are buying a large purchase. Be sure to read the terms and conditions, as you do not receive the full interest free period on all purchases – the interest free period will usually start on the first day of the new billing period.
Pay Off Your Balance
If you want to save money on credit card interest, one of the most important things to remember is to pay off your balance in full at the end of each month. While it can be tempting to only pay the minimum payment, you will usually only be paying off the interest and not putting a dent in your actual debt. Pay off your balance, and you won’t have to worry about interest accruing – and your credit card will be all the more healthy for it!