Finder is committed to editorial independence. While we receive compensation when you click links to partners, they do not influence our content.

Top 7 ways to clear credit card debt

Get your finances under control with our top tips for clearing credit card debt.

Credit card use has steadily increased in New Zealand over the last two decades, so it’s no wonder that credit card debt is a significant Kiwi concern. According to the Reserve Bank of New Zealand data released in August 2020, more than $6 billion was owed on personal and business credit cards.

If you’re looking for ways to reduce your debt or avoid it altogether, this guide provides some useful tips for doing so. You may also choose to apply a combination of these ideas.

1. Make regular repayments and pay more than the minimum

Create a realistic repayment schedule and stick to it. Making only the minimum repayment on your account keeps you trapped in debt for longer than necessary, and you pay far more interest than you need.

A $2,000 debt at 20% interest with a 2% minimum payment takes you over forty years to repay and costs you over $5,000 in interest if you only ever pay the minimum amount. Add $50 each month, and the debt disappears in three years, with just $500 worth of interest paid. The smart thing to do is create a budget for your monthly expenses and calculate precisely how much money you can afford to set aside for credit card repayments.

Pro tip: Setting up an automatic debit to transfer the repayment amount to your credit card account on a recurring date each month helps ensure you stay on track.

2. Repay the debt with the highest interest rate first

This strategy targets interest reduction, so you end up paying the least amount of interest over the long term. With high credit card interest rates, this could represent significant savings, and you can use the interest you save to repay the rest of your debt sooner.

Prioritise paying off the account with the highest interest rate first by allocating all available resources to it. Once you pay off that account, close it to avoid further charges and move on to the account with the next highest interest rate.

3. Apply for a credit card with a 0% balance transfer offer

0% balance transfer credit cards let you transfer your existing debt onto a new credit card. This provides you with the benefit of paying no interest for an introductory period, which results in interest savings for this duration. Plus it can help you repay your debt faster. Having one account instead of a number can also mean you save on account and administrative fees.

However, it’s essential to repay your balance transfer amount within the introductory period, since the interest rate typically reverts to the higher cash advance interest rate at the end of this time.

To make sure you repay the full balance within the 0% interest period, divide your debt by the number of 0% months offered by your card and faithfully repay that amount each month. For example, if you have a credit card debt of $3,000 and a 0% balance transfer offer for 12 months, you need to allocate $250 each month to clear the debt before the revert rate applies in the thirteenth month.

4. Consolidate your debt with a personal loan

A personal loan may also prove an effective way to consolidate your debt at a lower interest rate. A personal loan can offer substantial savings on interest payments in comparison to a credit card.

Compared to a balance transfer credit card, a personal loan also provides a longer loan term solution. When considering a loan, make sure you factor in related costs, such as application or establishment fees and monthly or yearly fees. Also, beware of further spending on your credit card once you reduce your balance to zero with a personal loan.

5. Refinance your mortgage

While it may sound drastic, refinancing your mortgage can offer several perks. It usually gives you access to a lower interest rate when you take on a new lender’s deal, and you might find a package with fewer fees and more features too. Carefully weigh up the pros and cons of refinancing your mortgage before you move your credit card debt onto it, as it means stretching the debt over more years, albeit at a lower interest rate.

6. Discuss the options with your bank

By having a chat with your bank, you may be able to negotiate a more comfortable payment plan amicably. You could receive approval for an interest reduction or a short payment hiatus, which could help give you an edge on your repayments.

However, if you’re seriously struggling to make repayments, you may wish to consider a Summary Instalment Order (SIO) or Debt Agreement, which lets you negotiate a lower repayment amount and new terms with your creditors. Please note, these are acts of bankruptcy that also have repercussions on your credit file.

7. Look into financial counselling

Before pressing the big red button, you might like to call for help. Financial counselling does not have to be expensive, and you can even receive free help for managing your debts. Obtaining professional financial and legal advice for your situation can sometimes be the first step toward debt freedom. Financial counselling provides personalised advice on consolidating your debt, managing creditors and protecting your credit rating.

How to avoid credit card debt


The following tips can help you keep your credit card under control, and prevent you from falling in debt:

  • 0% purchase credit card. Get a credit card that offers 0% interest on purchases. This allows you to make purchases and repay them without accruing any additional interest, but usually only lasts for a promotional period of up to 6 to 12 months. So you need to be aware of the revert rate that applies after that time.
  • Pay more than the minimum. Making only minimum repayments on your credit card balance typically means you’re just paying 2% to 5% or approximately $25 of your statement balance, whichever is greater. At that rate, it might take you years to repay even a modest balance. Learn how minimum repayments work and why you should be paying more.
  • Stick to a budget. Create a budget for your expenses each month and schedule a payment plan to cover your debt. Set up calendar reminders or, better yet, automatic debits to ensure you make payments regularly.
  • Move your statement due date. By making sure your statement due date is just after payday, you have the funds to repay your credit card bill on time.
  • Identify why you first fell into debt. If you clear your balance and want to avoid debt in the future, you need to identify why you lost control of your finances in the first place. Was it overspending, high-interest rates or a combination of the two? Try working with a budget or get a card with a lower interest rate. If you’re an impulse shopper, leave your credit card at home, so you’re not tempted to use it and make sure you only use it for necessary purchases.
  • Take measures to curb your spending. Creating a monthly budget should help control expenditure, but you can also consider reducing your card’s credit limit as a stronger deterrent to overspending.
  • Stop using your credit cards. If your spending problem requires more than monthly budgeting and occasionally leaving your credit card at home, consider cancelling your cards altogether. Prepaid credit cards and cash are surefire ways to avoid debt.

While credit cards can be a convenient way to pay, they make far better slaves than masters. If you find yourself in credit card debt, follow the necessary steps and seek assistance as soon as possible to regain control of your finances. When considering whether a credit card is still the best option, compare all your choices and be wise about what you need for your circumstances.

Back to top

Other guides you might be interested in

Pictures: Shutterstock

More guides on Finder

Ask an Expert

You are about to post a question on

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked provides guides and information on a range of products and services. Because our content is not financial advice, we suggest talking with a professional before you make any decision.

By submitting your comment or question, you agree to our Privacy and Cookies Policy and Terms of Use, Disclaimer & Privacy Policy.

Questions and responses on are not provided, paid for or otherwise endorsed by any bank or brand. These banks and brands are not responsible for ensuring that comments are answered or accurate.
Go to site