Credit card hangover? Here’s the 10 step program

Esta Hammond, Easy Ways to Save Money Updated January 8, 2013, 9:00 am

If your wallet is feeling a little sore after the holidays, here’s how you can get out of your credit card debt, fast.

The presents have been unwrapped and enjoyed, you have made it through another Christmas Day and a well deserved vacation, and you are finally able to do the top button back up on your jeans. But the one thing that might take a bit more time to recover from, is your credit card hangover.

If like many Australian’s you have enjoyed the holiday season with a bit of plastic fantastic, you are probably started to feel a little bit sorry for yourself right about now.

You might be wondering how you are going to pay it off, or even resolve yourself to slowly chip away at it over the next year, at which time the process repeats itself and on it goes.

Related: Five quick solutions to credit card debt

But it certainly doesn’t have to be that way, so here's a 10 step plan to get your credit cards under wraps, and hopefully have enough cash in the bank ready to go on your next holiday.

First of all, you need to get out of the mind frame that you cannot live without a credit card. This is a learned attitude, and one that you will quickly shed once you have proven to yourself that you can manage without one. And of course once you get off the credit card merry go round and never have to worry about it again, you are going to wonder why you didn’t do it sooner!

The 10 Step Plan:

1. Make the decision to get rid of your credit card and stick to it. Set yourself a goal to pay it off and get rid of the credit card once and for all.

2. Apply for a Debit Visa or Debit MasterCard. This will give you all the benefits of Visa and MasterCard, but instead of using the banks credit you are using your own funds.

3. Transfer your existing credit card debt to a card that has a low or 0% interest on balances transferred to give you a financial reprieve and help you pay it off much faster. To compare balance transfer cards with low or 0% balance transfers compare the offers available on Moneyhound today.

4. Once you have successfully applied for the new credit card and your balance has been transferred, you will receive your new card in the mail – CUT IT UP! The card is only to hold the debt temporarily, not to use for additional purchases.

Related: Which credit card is best?

5. Things are probably going to be tight for a while, because chances are you will have expenses coming in that you are used to charging to your credit card - but you can make it work. Go through your budget and find area’s where you can extract money to redirect towards paying off your credit card balance and also keep on top of bills.

The simplest of things will go a long way, like taking lunches to work; getting a better deal on your gas and electricity plans; have pot luck dinners with friends instead of going out for a few weekends; put a temporary stop on direct debits for services you hardly use like pay tv, gym memberships and magazine subscriptions.

If you are struggling and have a bill due that can’t work in with your immediate cash balance, call the service provider and ask for an extension or payment plan to help you out until you can get on top of things. And of course, use the money you would have otherwise spent on credit card interest towards paying out your credit card.

6. Find some ways to bring in some extra cash to help you stay on top of things while you are still in a transitional period.

You could possibly do overtime at work, get a weekend job, mow lawns, walk dogs, have a garage sale or sell unwanted Christmas presents on eBay, get a roomie, rent out your garage, make use of a talent or hobby such as teaching piano etc, or grow some tomato seedlings from a rotten tomato in your fridge and sell them at a local market.

Related: How to sell your stuff on eBay successfully

7. Once all your bills are paid and you have taken out your living expenses each pay day, divide your surplus income 60/40%. 60% you pay directly onto your credit card and put the other 40% in a high interest savings account.

This is because if something did come up and you needed money quickly, you could access the money in the savings account - as remember your credit card is chopped up and gone! But you only access it if you really need to.

This will help you change your habit from using credit cards to pay for what you need, to using your own savings. You will feel much more in control of your money, and of course have a much greater appreciation for the money you save yourself.

8. At some point you will get to the stage where you have enough money in your savings account to pay out your credit card if you wanted to. It’s your call, but just make sure to leave yourself with a little bit of a buffer, then pay it out.

9. Once you have paid off your credit card, call the issuer and cancel the credit card. This will usually require a letter in writing sent to them. Make sure to follow it up and ensure it has definitely been cancelled and your letter didn’t get lost in the mail (it happens).

10. Congratulations! You now have no credit card, and money in the bank! Now you have all the money you would have put onto your credit card each month in surplus - make sure you continue to put the money you would have spent into your high interest savings account – no excuses. You managed this long - you can keep it up, and you will always have money in the bank for when you need it.

Source: Esta Hammond, author of 'Save It – easy ways to save money' and founder of

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