How many credit cards do you have? One, two, three, maybe even four? Do you know the balance of each one, it’s due date, or the amount of interest you’re paying each month? Are your monthly payments barely making a dent, or worse, are your balances growing? With each debt repayment vanishing into the black hole of interest charges in this cost of living crisis, it’s totally understandable if only making the minimum repayments is all you can afford. Credit card debt can feel like quicksand, pulling you deeper with every passing month. But here’s the thing: yes, it’s easy to fall into debt, but escaping its clutches? That’s a whole different story. At MyBudget, we’re here to show you that getting out of debt doesn’t have to be stressful.
In this article, we’re going to give you some debt repayment strategies in a step-by-step guide so you can break free from credit card debt quickly and efficiently. We’ll even share how MyBudget clients Aaron and Jake managed to do just that! Ready to break up with your credit provider? Let’s get started!
Getting debt under control
Alright, let’s kick things off with a little reality check. It’s time to face those high-interest debts head-on, like the fierce financial warrior you are (or are about to become). Ignoring that pile of bills won’t make them disappear. So first things first, download our free eBook 6 steps to eliminate credit card debt, and we can begin step 1.
Step-by-step guide to get out of debt
Step 1. Write down all credit card balances and interest rates
Pro-tip: use our handy template on page 3 of our ebook to keep things super organised, because nothing says “I’m serious about crushing debt” like a neat and tidy list! Write all types of debt hanging over your head. We’re talking:
- credit cards
- store charge cards
- ‘buy now, pay later’ accounts
- personal loans
- that random IOU you’ve been meaning to deal with.
Next to each one, jot down the outstanding balance, the interest rate, and any overdue payments you’ve got lingering.
Documenting all these details in one place gives you a crystal-clear picture of where you stand. Plus, it’s the first step in taking back control of your finances. Ready to see what you’re dealing with? Start writing (or typing) now!
Step 2. Create a budget
Creating a budget is like the backbone of your financial comeback story. Without it, you’re basically flying blind, and when it’s time to negotiate with your credit providers in Step 3, you’ll need the crucial details that only a solid budget can provide.
Think of it as your financial GPS. Without knowing where you stand, how will you know where you’re going? So, grab our free Personal Budget Template and get started. If you need a hand setting it up, don’t worry; MyBudget’s money experts are here to tailor a budget that fits works with your debt repayment journey, ensuring you have a clear path to financial freedom and total peace of mind.
Step 3. How to negotiate with credit card providers
Alright, deep breath; it’s time to call up your credit card company. I know, calling about financial difficulty isn’t anyone’s idea of a good time, but this could be the lifeline you need. According to AFSA, banks and credit card companies are actually required by law to consider your request if you are experiencing financial hardship. They might waive late fees, lower the interest rate, or even freeze payments for a while. So, grab your phone, channel your inner negotiator, and try one of these lines:
- Ask for a lower interest rate:
“Hi! I’m having difficulty keeping up with my outstanding credit card debt. Is there any chance you could lower my interest rate to help me out? It’d really make a difference in getting my finances back on track.” - Payment plan or hardship help:
“Hello! I’m currently in a bit of financial stress and struggling to make my debt repayments. Could we set up a more manageable payment plan or discuss any debt relief options you might have?” - Waiving late fees:
“Hi there! I’ve hit a bit of a rough patch with all these rate hikes and missed a payment. Any chance you could waive the late fee? I’m working hard to get a bit of extra cash to get my finances back in order.”
These little scripts will help you glide through the conversation like a pro. Remember, the aim is to make some little changes now, that could result in big savings over a period of time, and your credit card provider is obligated to try and help.
Step 4. Choose a debt strategy
Just like there are a million ways to get into debt (we’re looking at you, online shopping sprees), there are also smart strategies to get out. Choosing the right one can save you loads of interest and also your sanity. Let’s dive in:
- The debt avalanche method: start by smashing the debt with the highest interest rate first, while keeping up with the minimum repayments on the rest. After that’s cleared, move on to the next highest, and so on.
Pros: fastest way to reduce overall debt and cut down on interest payments.
Cons: can feel like a slog if you’re tackling huge levels of debt with a high interest rate, but stick with it and you’ll see results.
- The debt snowball method: knock out your smallest debt first, regardless of the interest rate. Once it’s gone, tackle the next smallest, and watch your debt shrink!
Pros: great for motivation with quick wins and seeing balances disappear.
Cons: you might pay more in interest over time compared to the Avalanche Method, but those early wins can be worth it.
- The feel-good method: debt isn’t just numbers; it’s emotional. Target the debt that’s causing you the most stress or guilt first, like a lingering bill or money owed to a friend. Eliminating these emotional burdens can make you feel lighter.
Pros: excellent for mending relationships and having a positive impact on your mental health.
Cons: might not be the most financially efficient on its own, but combining it with the Avalanche or snowball methods can balance emotional and financial relief.
Whichever path you choose, sticking with it is key. Debt doesn’t disappear overnight, but with the right strategy and a bit of persistence, you’ll be well on your way to eliminating your debts.
Have you ever wondered about debt consolidation, is it right for you? You might find this article helpful.
MyBudget client success story: Aaron and Jake’s debt repayment journey
Meet Aaron and Jake: two clients who transformed their lives with a little help from MyBudget. With six credit cards, a mountain of debt, and creditors breathing down their necks. They were trapped in a never-ending cycle of making only minimum payments.
Initially, their journey was rocky, late payments, a bad credit score, a failed balance transfer, and additional debt piling up. Sound familiar? Well you’re not alone. Money’s statistics are in, and the average consumer debt balance for an Australian credit cardholder is $3,317, highlighting why credit card debt is a major concern in our country.
Exhausted and with no solution in sight, Aaron and Jake were on the verge of declaring bankruptcy. But guess what? In just two years, they slashed their debt by $30,000 and paid off three of their six credit cards. How did they pull off this financial feat? By teaming up with MyBudget, they received a fresh perspective, a realistic budget and a debt repayment strategy that worked for them, easing their financial stress and helping them embark on a brighter future.
“When you’re in financial hardship, it’s often hard to see a way out, whereas a debt expert knows your financial and legal rights, as well as which strategies work best in which situations. We deal with lenders and debt collectors every day, so we know what they need and how to work with them.” ~ Tammy Barton, MyBudget founder.
The couple’s breakthrough? They used the Debt snowball method and eliminated their debt one card at a time, and within a few years, their hard work paid off. They’re now saving for a home and planning their future with newfound freedom.
Dealing with their debt has given Aaron and Jake a new perspective on money.
Jake says “For the first time, we’re planning holidays, and not even thinking about using a credit card. We now see the value in saving”.
For Aaron, it’s the exhilarating feeling of having freedom to make choices.
“Being debt-free allows spontaneity in our lives without feeling like we couldn’t afford it or shouldn’t do something,” Aaron explains.
Aaron and Jake’s story is proof that with the right support and guidance, you too can break free from credit card debt and live life on your own terms.
Tammy Barton’s top 3 tips to pay off credit card debt
- Budget your way out of debt: credit cards can have a negative impact if you’re not careful. If you find yourself unable to pay off your balance in full each month, it’s a red flag that you might be living beyond your means. The solution? Create a budget that helps you cut down on consumer spending and gets that credit card balance under control. Trust me, a well-planned budget can be a game-changer.
- Use balance transfer credit cards wisely: balance transfer cards can seem like a knight in shining armour, but they can also be a double-edged sword if not handled correctly. Aaron and Jake learned this lesson the hard way. While balance transfers might offer a quick-fix solution to high interest, they can sometimes lead to deep debt if you’re not cautious. Make sure you understand the terms, including any introductory periods for interest rates and fees, before you take out that credit card balance transfer.
- Automate your finances: once you’ve got your budget sorted, automation is key. At MyBudget, we’ve seen first hand how automated payments, combined with a solid structure and expert guidance, helps clients with their debt management plan. Setting up automatic transfers to savings can turn financial chaos into a smooth, stress-free process. It’s all about ‘set and forget’ and let the system do the work for you, so you can focus on living your best life.
Wants vs. Needs: a mindset shift
Here’s a little secret: sometimes, getting financially fit is less about crunching numbers and more about a mindset shift. It’s all too easy to confuse wants with needs, especially when old spending habits sneak back into your life. By taking a hard look at your spending patterns and distinguishing between what you truly need and what you simply want, you can curb unnecessary spending and build healthier financial habits. It’s like giving your wallet a little pep talk—because sometimes, it needs a wake-up call to get back on track.
Looking for help to get out of credit card debt?
Feeling overwhelmed by credit card debt? MyBudget is here to help! We offer free, personalised budget plans that can guide you through managing your debt, creating a 12-month financial plan, automating your bills and payments, and building a safety net for emergencies.
We’ve helped over 130,000 Aussies get their finances back on track, and we’re ready to help you too. Enquire online or call us today on 1300 300 922 to find out how MyBudget can support you in breaking free from debt and achieving your financial goals.
“If you’re hoping to get rid of your credit card debt, don’t be afraid to ask for help. It may be the biggest step of your debt-free journey, and it’s the most important.” Aaron – MyBudget client
Did you know? Most of our clients pay off 90% of their unsecured debt in just over three years.
Cheryl is part of the MyBudget Corporate Finance team and takes care of the company’s finances with the same care that MyBudget extends to their clients budgets. She speaks from the heart about relevant financial topics, reflecting on her own personal journey through separation, single parenting, budgeting, investing and beating cancer.