1. Stop Spending

Seems obvious, huh? The trick here isn't to stop all of your spending (we don't advocate starvation) or even discretionary spending. You should still be able to buy the things you want. The important point is to stop using your credit card to make purchases.

If you're paying for every purchase immediately using either a debit card or cash, you'll get a better sense of just how much you're spending. It will also prevent your debt from getting any worse.

If you need to destroy all temptation, cut up your cards, freeze them, encase them in concrete or give them to a trusted friend.

2. Get a Lower Rate

So you've stopped spending. Now it's time to reduce how much interest you're paying.

Most Australians pay around 15-18% on their cards, but there are plenty of sub-12% cards available.

If possible, transfer your balance onto a low rate card, such as the Bankwest Lite MasterCard at 9.99%. Beware of balance transfer offers which offer a low rate for a short period of time, but then revert to a very high rate (particularly those which revert to the cash rate).

If you can't get a balance transfer, ask your bank to reduce your interest rate. Be reasonable about your request. A reduction of around 3% - 4% is likely to be considered by your bank.

3. Tackle Debts in Order

If you have multiple credit cards or purchases at different rates, make sure you're paying off the highest-rate balance first. Most financial institutions will apply payments to your lowest interest purchases first.

If you're unsure of the order in which your payments are applied, call your financial institution and ask. You may also request they change the order in which they apply payments.

4. Make smaller, frequent payments

Paying your minimum amount (usually 2% - 3%) each month can be a large lump sum. For example, on a $5,000 balance, it's $100 - $150.

Instead of a single, depressing lump sum, consider making smaller payments each week.

There are a number of reasons to do this. Most banks calculate interest on your credit card daily, so making payments during the month, rather than at the end, can reduce the total amount of interest you pay.

There are also psychological benefits. Smaller payments are less depressing and you'll see your balance reduce more frequently. You can also tie your credit card repayments to your wage so they occur automatically.

5. Log your spending

Keep an account of all of your spending and payments. A simple spreadsheet should do the trick. Most people find that by simply recording their spending, they're surprised at how much money goes where each month.

It will also serve as a benchmark for how well you're progressing each month and may be useful if you need to dispute any charges.

6. Apply unexpected payments to your debt

Most Australians received a $900 stimulus bonus two months ago, but few applied it to their credit card debt.

Now in tax season, you have another great opportunity to apply an unexpected lump sum amount (your tax return) onto your credit card debt. You may also receive money as gifts or from relatives.

Rather than spend it, consider it an investment which pays 17% interest (or whatever your credit card rate is).

7. Consider a debt management service or financial counsellor

You've made it this far on your own, and you should be proud, but consider using a financial counsellor to ensure you don't succumb to old habits.

A financial counsellor will be able to look at your financial circumstances (using that handy spreadsheet you've been keeping!) and make recommendations about the best way to proceed. They may organise a consolidation loan or assist you in applying for state or federal hardship grants you didn't know you were entitled to.

What next?

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