Step 1: Source a credit card that offers a 0% interest on all money transferred. Transfer the debt/s then cut up the card. Whatever you do not use this card for purchases. This is because once a purchase is made some providers will apply any repayments to the purchase amount and not to the interest free debt amount. Only transfer over your debts IF all the credit cards debt can be transferred.
Step 2: Cut up your original credit cards, then ring the credit card provider and have the cards cancelled. Easier said than done but you will never get out of debt if you don’t. If you feel you must have one card then keep one with a low credit limit and low rate of interest but do not carry it with you and keep it only for emergencies. Then start using a debit card instead.
Step 3: Either use the money in your bank account or use your credit card – don’t use both. Credit cards are an easy and convenient way for day-to-day shopping. However if you use the credit card and any money in the bank account then at the end of the month when the credit card bill arrives you won’t have any money to pay off the credit card. So either cut up the credit cards and just have a bank account with a debit card OR make your bank account hard to access (i.e. by cutting up the debit cards) and just use the credit card.
Step 4: How much can you sell from your home in a garage sale, eBay or auction to achieve some cash, put that straight on the card.
Step 5: Paying off multiple credit cards can be achieved if a disciplined approach is adopted. As with many things in life, the simpler the strategy then the easier it is to implement and the greater the impact.
The following example shows the situation where a client has four existing credit cards and they pursue the easiest and best way as follows:
It is important to start off with very clear research on the current interest rates and minimum repayments for each card.
Then order the credit cards so that credit card 1 has the highest interest rate and credit card 4 has the lowest interest rate.
|Credit card 1 (CC1)||Repay the minimum payment plus your surplus cash flow. So if the minimum payment is $50 / month and you can afford $500 / month to start paying this credit card off then pay $50 plus $500 = $550 / month into CC1 until paid off.
|Credit card 2 (CC2)||Pay the minimum payment until credit card 1 is paid off. Then pay CC2 minimum payment plus $550 / month from CC1 into CC2. So if the minimum payment is $40 / month you pay this until CC1 is paid off. Then pay $40 + $550 = $590 / month into CC2.
|Credit card 3 (CC3)||Pay the minimum payment until CC2 is paid off. Then pay CC3 minimum payment plus $590 / month from CC2 into CC3. So if the minimum payment on CC3 is $60 / month. Pay $60 / month into CC3. Then when CC2 is paid off pay $60 plus $590 = $650 / month into CC3.
|Credit card 4 (CC4)||Pay the minimum payment until CC3 is paid off. Then pay CC4 minimum payment plus $650 / month from CC3 into CC4. So if the minimum payment on CC4 is $35 / month. Pay $35 / month into CC4 then when CC3 is paid off pay $35 plus $650 = $685 / month into CC4.
If you obtain a windfall with surplus savings at the end of month, a bonus from work or a tax refund then put that straight on to reduce your credit card debt.
And finally – when all the credit cards are paid off – make a solemn promise to yourself to never ever get into debt again and above all CONGRATULATE yourself because you have paid-off multiple credit cards and it is HARD.
Disclaimer: Mark Chaston is an Authorised Representative (No. 263236) and Chaston Financial Solutions Pty Ltd ABN 18 091 037 366 is a Corporate Authorised Representative (No 1244249) of ClearView Financial Advice Pty Limited ABN 89 133 593 012 AFS Licence No. 331367 GPO Box 4232, Sydney NSW 2001. The information provided on this webpage is intended to provide general information only and the information has been prepared without taking into account any particular person’s objectives, financial situation or needs. Before acting on such information, you should consider the appropriateness of the information having regard to your personal objectives, financial situation or needs. Please click here https://financialplannerbaldivis.com.au/ to find out more about the services we offer.