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Getting in control of your credit card

If you find yourself struggling to keep on top of your credit card payments and can never get your balance down, here are seven ways to help you get in control of your credit card debt.

5 minute read

For some of us, having a credit card means paying the minimum amount and always being at the limit. Use these seven tips to take back control of your credit card and to feel liberated from your credit card debt.

1. Plan your approach

If you're serious about being in control of your credit card you'll need to make a few tough decisions first. Can you really control your credit card spending and use it wisely? Or are you better to pay your credit card off completely and then close it? Credit cards can be a great tool, but it's about finding the best way to make them work for you.

First, eliminate the spending habits that created the debt. Then make a plan for the money you have coming in. Next devise a strategy to pay off the debt, and finally, find a way to navigate your finances moving forward so that you avoid slipping back into old ways.

2. Eliminate the negative

Getting control over your credit card debt means understanding how and why you got there in the first place. To do this, you need to take an honest look at your spending habits and identify places where you can stem the flow of money out of your accounts. You’ll need to be brutally honest and ready to make sacrifices to free up money that can be funnelled toward the debt. A good way to do this is to create a budget which will become your blueprint for the future.

3. Cut interest costs

When it comes to interest, the longer you have credit card debt, the greater the cost; and that’s money that would be better off paying down your debt. So get smart about it, study up on the cost of borrowing, and minimise your interest costs. One way of doing this is to find the lowest credit card interest rate you can. Chances are your bank will have a low rate card that you might not know about. Let your bank know what you’re trying to achieve and get some expert input.

4. Balance transfers

Another way to accelerate paying off your card is a balance transfer. A balance transfer is when you move an existing credit card balance to another card, which usually charges a lower interest rate. This could offer an even better deal on interest costs, albeit over a shorter period. Some deals will have a special rate for six to twelve months on the transferred debt before reverting to the standard interest rate. If you’re able to pay more in a shorter period of time (and are disciplined enough to limit spend on the card at the same time), this could save you some interest charges. You’re also often able to transfer multiple balances onto the same credit card.

5. Find a strategy that suits

Paying down credit card debt can be a personal thing which means finding a strategy that works best for you. For instance, if there are multiple debts involved, some people prefer to tackle the larger amounts that carry the highest interest costs first. Others might find success by knocking off the smallest debt first to get a few quick wins under the belt.

6. Debt consolidation loans

If it all seems too much, applying for a debt consolidation loan could be a good way of condensing many debts into a single loan. You could consider refinancing or consolidating any higher interest debt you may have (e.g. credit cards, personal loans, or overdrafts), onto a lending product with a lower interest rate and potentially over a longer term which could reduce your payments. This tactic also helps by creating a degree of certainty around your monthly costs. 

A personal loan typically has a set term of a few years with repayments that are the same each month. This can make managing your money easier since you know exactly what's coming up. However, some of these options could result in you paying more interest over the term of the loan, so you'd need to think carefully about your options. If you need help, you can seek advice. There are a number of organisations such as Money Talks that can assist.

7. Staying debt free

When the end is in sight, it’s time to think about how you can stay debt free. You could start by lowering your credit card’s limit to something more manageable. Try to pay off your card in full at the end of each month to avoid interest altogether, and it could be a good idea to look for a low interest rate credit card if you don’t quite manage to pay it off in full. Also, try to limit using your credit card to withdraw cash as this attracts a higher interest rate that starts accumulating from day one.¹

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This article is solely for information purposes. It’s not financial or other professional advice. For help, please contact BNZ or your professional adviser. No party, including BNZ, is liable for direct or indirect loss or damage resulting from the content of this article.

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¹For BNZ credit cards, a cash advance fee will apply. Debit interest is charged on all cash advances from date of the transaction and, for advances in foreign currencies, a foreign currency service fee will also apply.