Fantastic plastic? Most don’t think so. Credit card debt is just about the worst kind you can accumulate. In a time when interest rates on savings accounts are at historic lows, credit card companies are charging an average 18 per cent.

And that’s not even taking into account the annual fees, which can easily add another couple of hundred dollars to your account each year.

The average Australian has $3,344 in credit card debt, but if you’re only making the minimum payments on that debt with 18 per cent interest, you’ll pay a total of $10,839 over 26 years and nine months. And that’s if you’re not adding any more debt to the card.

Seems kind of stupid, right?

Having debt can feel overwhelming, but all debt is manageable and getting it out of the way does great things for your financial and mental health. When you’re turning your attention to toppling debts, it’s probably best to start with your credit cards.

The first thing you should do, regardless of the size of your debt or the security of your job, is to call your bank and ask them to reduce the rate of interest on your card. It might seem bold, but it’s as simple as getting on the phone and asking.

Cut your credit card debt

Cut your credit card debt

If the person you’re talking to isn’t able to do that, ask to be put on to someone who can. Even the big four banks (those evil supervillain organisations) recognise that this is a tough time for everyone and they’re doing their best to retain customers by reducing interest rates and making it appealing for you to stay with them.

If you’re lucky, you may be able to get your interest reduced to zero for a fixed time period, with a lower ongoing rate. Be polite and extremely persistent and you’ll probably be pleasantly surprised.

If they flat out refuse to help you, don’t give up. Instead, look for a card with a zero interest balance transfer deal. This means you can transfer your credit card debt to a new card that will charge you no interest on that amount for a year.

Too good to be true?  Sometimes. If you don’t think you’ll be able to pay off the debt within a year, check to see what the interest is on new amounts. If it’s significantly higher it may not be worth the hassle.

The next thing you should do is pay off as much as you can every month. If you’re only paying the minimum, you’ll end up paying a huge amount of interest over the lifetime of the debt.

Make sure you have at least a month’s worth of expenses in your emergency account (if possible), then set up a direct debit – the maximum you can afford – from your pay (or your JobSeeker or JobKeeper payments) towards your credit card. If worse comes to absolute worst, you can use your credit card again to cover emergencies, but at least you will have reduced the amount of interest you’re paying.

If possible – if you have a solid emergency fund or a secure job – cut up your credit card so you can’t give into the temptation to undo all your good work.

Many people find it hard to pay off credit card debt because it doesn’t come with the same dopamine hit that spending that money in the first place did, but reframe it as buying yourself financial freedom and relief from the stress of debt and it will seem a lot more appealing.

Set yourself smaller goals and reward yourself – without spending lots more money. If you’re a nerd like me, a gold star chart to mark every $X amount you pay off might work, other people might prefer dessert or a glass of wine at each milestone. Or start thinking about what you’ll be able to do with your money when you’re paid off, like save for a holiday or build your emergency fund or start investing.

The biggest reward for paying off the credit card is the weight off your mind that comes with being debt free. Financial independence is a wonderful, empowering feeling that’s worth a bit of restriction in the short term.

Once it’s all paid off, cancel your credit card. Just go ahead and cancel it. Don’t listen to anyone who tells you credit cards are a modern-day essential. Debit cards offer all the same functionality as credit cards without any of the fees, interest or risk of falling into debt again. If you want something, save up for it and buy it with your own money. The sense of reward is greater, and you’ll pay less for it in the long term.

If you’ve knocked credit card debt on the head for good, we’d love to hear about it! Share what worked for you in the comments below.

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