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The ultimate guide to being cheap, part 2:

Lesson number 2: the first step to saving is to pay off credit cards before doing anything else.
By Fred Schebesta
Date: September 03 2013
Tags: money,
Editor Rating:

Are you partly (or largely) at fault for the 0.46% rise of credit card debt in Australia since April? With credit card interest averaging 19.55% it’s likely you’re not alone in paying an arm and a leg for your credit splurge.

However, before you considerer any drastic options to earn back some coin, I’m here to provide you with several easy tips for working off those unwanted debts. And yes, it may involve you having a large slice of humble pie and becoming a self-labelled cheapskate for a limited time.

Follow this second instalment of The Ultimate Guide to Being Cheap to learn how to work off bad debts, but be prepared; you won’t be debt free overnight.

1.  Pay off credit cards before saving

While it can be satisfying to begin saving straightaway, it’s best to pay off card debt first. You will pay more interest on your debt than any interest you may earn from a high interest savings account. What’s more, paying off debt will train you to save: you can turn your debt repayment amounts into monthly savings.

2.  Stick to a repayment plan

Create a budgeting plan around the payment dates of all your bills, so you won’t incur late-payment fees. On credit cards, missing a repayment will not only incur a fee of up to $30 on some cards, but will disable any interest-free days in your next statement period and will continue to build your debt as a result.

3.  Pay off your smallest debt first

If you carry multiple credit cards, aim to pay off the one with the smallest amount of debt and close it. The repayment amounts can then be directed at the next card. Use this momentum to continue to pay down your debt quickly and develop a healthy debt-reduction ‘addiction’.

4.  Take up a balance transfer offer

Many cards offer between six to 12 months zero-interest balance transfer offers. On a $10,000 credit card debt, this could save you up to $850 over six months. Two competitive cards right now are the ANZ Low Rate card (0% p.a. interest on balance transfers for nine months and a $58 annual fee) and the HSBC Credit Card (0% p.a. interest on balance transfers for six months and $0 annual fee).

5.  Consolidate your debts

Have a bunch of different credit cards and personal loans? Managing your budget will be easier with one monthly payment, and will reduce bank fees.

* * *

For more information or tips from Fred, visit

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