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Credit Card Consolidation
We’ve already learned quite a bit about personal debt, so this week we’re going to move on to dealing with one of the main sources of personal debt.
Credit cards. Those devilish things. Credit cards have become very much a part of our everyday lives, with many of us having several of them. And there is no doubt that they offer huge convenience, for some time at least… At times, however, we can allow our retail therapy to get a bit out of hand, and run up debts that our credit cards can’t quite handle!
When you run into difficulties with your credit cards, consolidating the debt into one credit card, loan, or another credit account can make financial sense. So here we’re going to take a look at all of the key information related to this process.
Step 1: Test your knowledge of credit card consolidation.
Step 2: Understand why credit card consolidation is important.
The consolidation of credit cards is such a pressing issue owing to the serious situation surrounding personal debt in Australia. According to OECD data, the level of personal debt in Australia doubled in the two decades between 1995 and 2015.
Australian personal debt has continued to escalate in the post-credit crunch world, even as other nations have been able to stabilise personal debt in the years following the 2008 financial crisis.
In fact, of all countries in the developed world, Australia has the fourth highest personal debt to income ratio – 212% according to the OECD – behind Norway, the Netherlands, and Denmark. While the majority of this debt can be attributed to mortgages, credit card debt is the main contributor.
A recent report from the Australian Securities and Investments Commission (ASIC) regulator indicated that outstanding balances on Australian credit cards total $45 billion. ASIC noted that nearly 20% of Australian consumers are overwhelmed by credit card debt and that the issue was becoming a major problem.
Credit card debt can also place a particularly strong burden on young people. Youthful generations are more likely to acquire credit cards than other forms of credit, simply because they may be denied other more affordable forms of credit.
Considering that credit cards usually attract high rates of interest, it is imperative for people to tackle their credit card problems if they have them. Consolidating credit card debt can often be an important step in this process.
Step 3: Calculate your interest payments.
Once you have worked out your best options with regard to credit cards and consolidation, you can check out your interest payment by using this calculator. This will help you understand whether it is the right move for you.
Step 4: Stay up-to-date.
That's it for this week.
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Disclaimer: This article contains general information only, and is not general advice or personal advice. Wisr Finance Pty Ltd does not recommend any product or service discussed in this article. You must get your own financial, taxation, or legal advice, and understand any risks before considering whether a product or service discussed in this article may be appropriate for you. We have taken reasonable efforts to ensure that the information is accurate at the time of publishing, but the information is subject to change. We may not update the article to reflect any change.