Credit card hangover? Here’s the 10 step program

By Lauren Leisk, Yahoo7 Moneyhound Updated January 2, 2015, 6:00 am

Is your wallet is feeling a little sore?

With Summer came boozy get-togethers, weekends away, family theme park visits and surf lessons.

And if like many Australian’s you enjoyed the Summer relying on your little plastic friend, you are probably starting to feel a little bit sorry for yourself right about now.

That's right, you've got a credit card hangover, and no amount of Berocca is going to fix it.

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

But it certainly doesn’t have to be that way, so here's a 10 step plan to get your credit cards under wraps.

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:

Step 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.

Step 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.

Step 3.
Transfer your existing credit card debt to a card that has an offer of 0% interest on debt balances transferred to give you financial reprieve and help you pay it off much faster. Compare various balance transfer card offers with low or 0% at Moneyhound today.

Related: Which credit card is best?

Step 4.
Once you have successfully applied for the new credit card and your debt 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 it for additional purchases. And don't use your old cards either to accumulate more debt!

Step 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 plan; 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.

Related: Work lunches from $2 a day

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 down your credit card debt.

One of the easiest ways to ensure the debt gets paid down by the 0% offer time limit, is to split the debt amount by the number of months that you have to pay and schedule a direct debit payment for the same day you are paid, so as to ensure you chip away at it regularly.

Step 6.
Find some ways to bring in some extra cash in 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, babysit, have a garage sale or sell unwanted items on eBay or Gumtree. Get a roomie, rent out your garage, or make use of a talent such as teaching piano or English etc.

Related: How to sell your stuff on eBay successfully

Step 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.

Then, if something does come up and you need money quickly, you can access the money in the savings account.

This will help you change your habit from using credit cards to pay for what you need by 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.

Step 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.

Step 9.
Once you have paid off your credit card, call the issuer and cancel the credit card. This might 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).

Step 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.

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