Tricks to killing your credit card debt for good
Borrowers have turned their backs on credit cards during the pandemic by wiping billions of dollars in debt and shutting down their accounts.
About 500,000 credit card accounts have been closed since March and debts accruing interest have fallen from a peak of $36 billion in 2012 to just $21.4 billion in July.
The pandemic has forced many Australians to reassess their financial state during the pandemic and wipe the slate clean.
Small business owner Catherine Rosenbrauer, 63, who runs an airbnb business in Port Douglas, says her bookings dried up during the pandemic which forced her to review her financial state.
"I lost virtually all of my airbnb business so I sat down and looked at where I could simplify things and reduce cost," she said.
"I looked at the number of credit cards I had … I thought it was time to get rid of anything that was a surplus."
She had two credit cards with limits of $20,000 each and despite not owing any money on them she wanted to remove the temptation to use them.
Rosenbrauer says it involved phoning up the two lenders and asking them to shut her accounts - one bank did it with ease while another tried to encourage her to keep a card to which she declined.
Tribeca Financial's chief executive officer Ryan Watson urges people to think through what they have a credit card for before getting rid of it.
"Before closing down your credit card, it is best to make sure that you saved up some money 'for a rainy day', in the event that a true emergency strikes," he says.
"Otherwise, it is probably best to keep your credit card open for a few more months … just in case."
Watson says once you do decide to shut it down to make sure you redirect any direct debit that are linked to the account.
ANZ's managing director of business owners Guy Mendelson urges people to work out why you have a card and whether you will need it down the track before getting rid of it.
"Consider if you need your card to cover off everyday expenses in the future as if you change your mind and would like a new credit card, you will need to go through a new application," he says.
He also says there are other options rather than ditching it altogether.
"To avoid having to reapply in the future, customers may like to consider the other credit card options available to them, like reducing the credit limit or moving to a cheaper, lower-tier credit card," Mendelson says.
CLOSING YOUR CREDIT CARD ACCOUNT
• Pay off your credit card balance in full.
• Cancel your direct debits linked to the cards.
• Contact the card provider and get confirmation.
• This can be done online or by phoning the lender.
• Ask for a refund if the card is in credit.
• Cut up the card.
Originally published as Tricks to killing your credit card debt for good