The Business Advisory Blog

The Business Advisory Blog

Insight, news and updates from Alliott NZ Chartered Accountants, Auckland New Zealand. The views expressed here are the views of the author and should be discussed in further detail should an article be relevant to your individual circumstances.

While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.

Greg Millar
Published on

As New Year credit card bills hit your letterbox, take control on managing debt if you’ve maxed out your credit card in the run-up to the festive period or overspent during Christmas.

credit card-233 New Zealand’s combined credit card debt is nearly $6.5 billion – roughly $1,500 for every man, woman and child.  If you’re looking for methods to reduce your credit card debt post-Christmas, you’re not the only one but you don’t want high-interest rates making your debt even greater!

Whether you just have a few hundred owing on your card or even thousands, there are some simple steps to get you paying off the debt.

1. Stop adding more debt to your credit card

By cutting back expenditure, cancelling or downgrading some services or purchasing cheaper or recycled goods, you can put more money aside to pay off your debt. Also consider selling old or unwanted items to generate extra cash.

2. Pay more than the minimum repayment

Even an extra $50 per month will make a considerable difference. You should pay more than the minimum repayment amount on your credit card each month or make two minimum payments each month instead of just one. Both strategies help reduce debt faster and curb the interest charged to your card. Work this into a budget by consolidating debts, making additional income or economising on luxuries in your monthly spending.

3. Payday pay-off

Set up a direct debit to pay a fixed amount off your credit card balance each payday. Use online banking to organise an automatic transaction to occur each time you get paid, taking money from your everyday savings account and paying off the credit card before you have the chance to spend it.

4. Prioritise payments

If cutting up your cards and consolidating your debt is out of the question, then it makes sense to target payments on one card first by paying off the one with the highest interest rate or tackling the one with the smallest debt. Pay off your cards strategically to reduce the amount of interest charged or the number of repayments.

No matter what option you choose, you should still meet the minimum monthly repayments for the other cards. Interestingly, if you haven’t done your tax yet, do so and any refund can be used to reduce the debt.

And, if asking your credit card issuer for some leeway on having your interest rate reduced just isn’t an option, then do some research. You might actually find that a competitor can offer you a lower rate option, and your current provider might just match the offer.

When dealing with excess debt, also consider speaking with your accountant. We can help organise your finances and recommend solutions for consolidating and reducing debt – no matter what your situation.

Topics: budget credit card debt