Tips to help you pay off your credit card faster

Tips to pay off your credit card debt faster

When it comes to credit card debt, there’s no point burying your head in the sand. The sooner you face your debt, the sooner you can take action!

Bringing down the balance on your credit card makes a fine ambition, but it also takes commitment and planning. Making only the minimum repayments doesn’t effectively pay down debt, as it primarily covers interest charges and a small amount of your principal balance, meaning it will take much longer to pay off your balance in full.

Getting on top of your finances and putting together a plan to get back on track could be easier when it’s broken down into simple steps.

1. Understand credit card interest rates

Credit card interest rates are a critical factor in determining how quickly your debt accumulates, so it is important to carefully look at and understand the interest rates and fees on your card, rather than just the balance. A higher interest rate means a larger portion of your monthly payment goes towards interest rather than reducing the principal balance, meaning you may end up carrying your debt for longer. 

2. Create a clever repayment strategy

Creating a plan for your repayments could help you stick to your goal and help you pay off your debt sooner rather than later. Setting up an automatic payment or direct debit may be a good way to help you prioritise your card payments and make sure your credit card is getting paid down each month.

How you choose to pay off your debts is up to you. You could also choose to pay off your debts with the highest interest rates first to help get a hold on the debts which will add up the fastest. Or you might feel more motivated when you pay down your smallest debts first.

3. Pay more than the minimum payment each month

Making only the minimum payment amount on your credit card statement each month is the slowest and most expensive way to pay off your debt as this extends the repayment period and increases the total interest paid.

Rather than making minimum repayments, aim to pay off as much as possible until you bring your balance back down. Even better, paying off your card in full every month will help you save on interest and keep your debt under control.

4. Lower your credit limit

As you make repayments and watch your balance reduce, it also could make sense to reduce your credit limit to keep future spending in check. After all, it won’t help if you keep spending on your credit card while you’re trying to reduce the balance.

Remember, it’s important to actively manage your debt to keep a positive credit history.

Credit card limits vary, so it may help by choosing one with a lower limit in the first instance. 

5. Consider consolidating debts with a balance transfer

Balance transfers could be a powerful way to save on interest and pay off your debt faster. If you have several credit card debts, a balance transfer helps to bring them together and simplify your finances.

Many credit cards offer low or zero balance transfer interest rates for a period of time. Be sure to know when any introductory offers end so you can plan to pay the transferred balance off to avoid reverting to the cash advance interest rate.

With Westpac, you can consolidate multiple credit cards (up to three non-Westpac Australian credit, charge or store cards), with a minimum transfer of $200. When you transfer the funds to a new credit card, don’t forget to cancel the old card once it has a balance of zero. 

6. Keep track of spending

Keeping track of your spending for managing and reducing credit card debt. Developing a monthly budget is a good place to start, so you have oversight of all your income and your expenses and can allocate a specific amount towards debt repayment.

To sum up

Reducing credit card debt faster requires a combination of understanding the interest rate, making more than the minimum payments, consolidating debt, and keeping an eagle eye on your spending. It’s all about having a strategy and being consistent, and it’s never too late to start!