Five Ways To Pay Off Your Credit Card Debt Without Hating Life

By Emma Pegrum
18th Mar 2018

We should’ve learnt the very first time we owed our sibling $8.50 for a coffee and muffin: debt isn’t fun. Sure, there are lots benefits to having a credit card and it’s great if you can take advantage of them—a well executed accumulation and use of frequent flyers is enough to convince anyone that credit cards are life. But what happens if you take it too far and end up in debt? 

We spoke to FPA Certified Financial Planner Professional of the Year, Michael Hayward from Capital Partners, an award-winning financial advice firm, to get his top five tips on how to pay off credit card debt.

1. Look For Low Interest

For all those real adults who are basically surrounded by looming debt, you might be surprised to hear that one of your other financial limbs could help you out here. If you have a home loan, and you have equity in it—that is, you can drawdown from the money you have sitting against your loan—you should be using that money to take care of your credit card debt. The far lower interest rate on your mortgage repayments will seem like a dream after you’ve struggled under ridiculously high credit card interest rates.

Similarly, you might consider taking out another loan with lower interest rates (are you getting the picture yet?) than your credit card, like a personal loan or a debt consolidation loan. If you find yourself in this situation, debt consolidation loans are, as the name might suggest, basically made for you. They normally have fixed repayment periods and lower interest rates making repayments more manageable. Where there’s a will, there’s a way. And in this case, there’s definitely a will to pay less interest.

2. Go Credit Card Shopping

As you may have realised, credit card providers really like receiving your interest-laden cash. But when you’re in debt, you can (sort of) make this work in your favour. Credit card providers use balance transfer offers in order to attract new customers—so if you’re in debt, shop around for better rates, low promotional rates, good balance transfer offers or longer interest free periods.

Switching to a new card might allow you to take advantage of a renewed interest free period to pay off your debt without accruing more, or at the very least, the lower interest rate will allow you to make bigger dents in your debt per repayment, getting your debt paid off faster and saving you money in the long run. Just make sure you understand the new credit card’s benefits and requirements beyond the promotional or special offer period—you don’t want to get caught out again!

3. Understand Your Surplus Income Position

This one’s pretty important, but also very simple. Lots of people are throwing money at bills, repayments and debts without really understanding their financial position. Understanding your ‘surplus income position’—which is really just a fancy way of saying ‘knowing how much money you can spend’—is crucial to any debt repayment plan. Be clear on what money comes in and what goes out: the difference is your surplus, and should be used to pay off any credit card debt, NOT for smashed avo, soz.

4. Reprioritise Your Budget

Ooh, priorities. Aah, budgets. Yep, they’re painful words that no one likes hearing. But you know what’s more painful? A lifetime of debt. If you’ve tried all the above, and understanding your surplus position has only made you depressed instead of more able to pay off your debt, you might need to do a serious overhaul of your budget situation. Are there areas you can cut down on spending? And equally, are there opportunities for income that you aren’t capitalising on?

5. Learn From Your Mistakes

That’s right people. If you’re adult enough to have credit card debt, you’re adult enough to be learning from your mistakes. Going into debt on your credit card might not always be avoidable, but often it resembles overspending and living outside your means. Perhaps you need to consider whether you can live without a credit card, and just remove the temptation altogether. At the very least, learn to keep track of your expenditure and ensure it doesn’t exceed what you’re earning or what you’re capable of paying back.

While we're on the topic, here are 25 things to stop paying for right now to save bulk cash.

Image credit: Elle Borgward

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