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Help! I have three overdue credit card bills

I have had a terrible period lately – both work-wise and emotionally – and have run up a big credit card bill across three different cards. I am receiving letters of demand but I have been running away from them, putting my head in the sand, so to speak. I am afraid of the consequences of my actions and while I am employed I can’t see how I will pay the money back especially as the interest rate is close to 17 per cent. What would you advise?

The first thing you have to do is pull your head out of the sand and start the first steps in curing your credit card addiction. It has been a chaotic approach to debt that has created your predicament and so you have to do the opposite of all of your normal behaviour to right the wrong.

My first suggestion is to give the cards to someone you know and respect such as an older family member to show you have the guts to own up to the problem. If you can’t do that – cut the suckers up!

Next, get on the internet and look up financial counselling as there are a number services – not-for-profits often funded by governments which offer help. You need someone to help you over a problem that tens of thousands, and maybe hundreds of thousands of Australians have endured.

You will answer the letters of demand with the various financial institutions and simply confess to your predicament. This will affect your credit rating but over time you can restore that – the critical thing is to address the debt and your attitude to using credit.

I would approach your bank and see if you can consolidate all of your credit card debt into one personal loan, which should be at a lower rate of interest. If your banker is any good, they should work out a repayment plan that’s doable given your income.

Next, and this could be the tough bit – change your lifestyle. Your old life gave you this problem, so let’s make a new money you. Establish a goal that comes after you pay back the debt, say a holiday, an apartment or a car that you can use to make even more money.

After that, get a second job working on the weekends! In the old days, lots of people would work in a pub, a café or at, say, footie grounds to get extra money to buy a house or to go overseas. In those days, credit cards were hard to get and people saved before they spent and so I recommend you step back in time to solve this new age debt disease.

This is your chance to turn a threat into an opportunity and so good luck with it.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information: This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice.

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Published on: Monday, July 11, 2011

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