So many people are still under tremendous financial stress following the economic collapse of the previous two years – and much of it is credit card debt.

It is so easy to get into trouble with credit cards and so very hard to dig yourself out again – especially as banks and credit unions generally won’t let you swap to cheaper rates – even though they will offer them to new customers.

Time and again you hear that banks refuse point blank to let customers swap to lower rate cards – especially if you have lost your job or your working hours have been reduced.

This just seems like sheer greed by big financial institutions. People struggling to repay credit card debts at 18 or even 22 per cent should be given the opportunity to choose a lower rate card and make their repayments more manageable.

Given that this option is unlikely to be offered to you if you are in substantial debt, we have scoured that fabulous website – www.simplesavings.com – for the very best tips we could find to help you reduce your credit card debt.

You can still try to ring different banks or go online to check who is offering the cheapest rates but if switching to a lower rate is not possible, Simple Savings members have found some clever and resourceful ways to help you.

Highest rate card first

Last year, when we were on a reduced income because of my maternity leave, we accrued an extra $6,000 debt on our credit card, on top of the $6,000 debt we already had. I decided, after joining Simple Savings, that I was sick of living from pay cheque to pay cheque, and was going to devise a budget that worked, and that would pay off our ridiculous credit card debt, once and for all!

My husband works as a seasonal contract labourer, so his income is irregular, whereas I get paid fortnightly. So, every time either of us gets paid, I forecast the budget a fortnight ahead, then go and pay those bills straight away, before they are due. 50% of what is left over goes on the credit card with the highest interest rate. The other 50% I call our 'discretionary budget', which has to include groceries, social occasions and luxuries.

This works for us as the bill money isn't sitting in our account where it can be spent. We are not stung by late payment fees, and we aren't overspending on our groceries. If we have no discretionary budget for that week, it's $21 Challenge week!

So far, in just one month, we've paid an extra $224 off our credit card debt, on top of regular repayments and interest!

'Tough love' debt reduction

A close friend of mine has a credit card problem – her total debt on just two cards had ballooned to over $22,000. My friend asked for my help because, despite being on a relatively high salary, no budgets or savings tricks were working. While the plastic burned a hole in her pocket and the debt stayed depressingly high, she would pay off large chunks of debt and then go shopping, only to max out the cards again.

The solution has been to hand over all her financial management to me. This has really worked. The credit cards have been cut up, passwords re-set by me and all statements, new cards and credit limit increase offers now come to my address. Every pay cycle I transfer funds to bring down the credit card debt, allocate a weekly allowance to her current account and pay off other bills.

After five months, the debt is down to $15,000. This extreme savings solution relies on trust, room for negotiation and support of other friends and family. This system is also teaching her to live more frugally by limiting the weekly spend. This solution is not for the faint hearted but it recognises that saving and debt reduction sometimes requires 'tough love'.

'Breaking up' with credit card stops impulse buys

I have put 26kms between myself and my credit card to stop me making impulse buys. I have given the card to my sister to look after, so if I really need an item I have to get in the car to retrieve it, but I can still pay bills over the phone. So far my pride has stopped me making the trip to get it back, making sure my money is working on the mortgage!

Cut up your cards and avoid stress

I am not a good budgeter. With two credit cards, I found that I was spending too much money and our card balances were scary! Each week I also took out an allocated $200 for grocery money plus an extra $30 or so for 'pocket money'.

However, I found I was spending the grocery money on other things in addition to groceries. Then I would run out of money and - you guessed it - out would come a credit card. So I made some changes. I cut up both of my cards. With my husband holding the primary, and only, cards, I wouldn't be able to buy anything without being forced to think it over, plus he would have a say in it.

I also decided that instead of taking out cash for the groceries, now I buy a Coles card (which is where I shop) with the amount credited to the card. That way, I am only able to use it for groceries and once it is gone, it's gone! If there is any leftover, then I have a little 'bonus' money to buy those treats I wouldn't normally buy.

The Coles card acts like a debit card, and you can spend as little at a time as you like, unlike using vouchers where they make you spend the whole amount because they won't give more than 5% in change.

I still get $30 for myself for the week, but I am finding it is enough, my husband is stressing a lot less and is able to work on getting rid of the credit cards.

Don't be overwhelmed by debt

I used to work as a credit controller and often found people were overwhelmed by their debts and buried their heads in the sand rather than confront them. I have some suggestions to help others get back in control of their debts.

1. COMMUNICATE! If you stay in touch with your creditors from the start, they are less likely to refer you to a debt collection agent for legal action.

2. STAY PLEASANT! It astounded me how many of my clients would swear and rant and abuse me, then demand an extended payment arrangement or favours! You will find that the credit officer you speak to will be far more sympathetic and prepared to work with you if you are pleasant to talk to.

3. TRACK YOUR DEBTS. If you have a computer and are Excel literate, create a spreadsheet tracking your debts. If not, use a piece of paper stuck to the fridge, ruled into a grid. Column titles should be: Supplier Name, Account Number, Invoice Number, Invoice Date, Due Date, Total, Discussion notes, First Instalment date and amount, Second Instalment date and amount and so on...

Include items such as rent or mortgage, electricity and gas and other regular costs. Update the record regularly and you will find it much easier to keep track of your financial situation. Scary as it is to look at it as a whole picture, you are better to do this, so that when you are negotiating an extended arrangement with a creditor, you can realise your current financial commitments and not then over-commit yourself to a new arrangement.

4. BELIEVE YOU CAN DO IT! Too many people when faced by a debt situation panic and go for an extreme option. Believe in yourself and your ability to get to the end - and plan a reward for when you clear each major debt. I often plan to have a facial or buy a book with the first available funds after clearing an aged debt, generally using a similar amount to what would have been the next instalment. It's a simple but nice incentive.

5. GET ADVICE! Many establishments (such as banks, credit unions, Centrelink, charitable organisations etc) have financial advisors that visit regularly to help people with overwhelming debt situations. Book yourself in!

6. AVOID THE SHARKS! Don't fall for the 'consolidate your debts' traps. So often people consolidate their debts into special loans with higher interest rates, then keep the credit card that was the cause of the debt - and run it up again! It's a vicious cycle!

Free online credit card calculator

I have found a wonderful online calculator which tells me how long it will take to pay off my credit card. When sorting out my budget, paying off debts and deciding how much money I should allocate where, I was completely lost, but not anymore! You can input the minimum payment amount (and scare yourself) but you can also put in the higher amount and it shows you how long it will take to get it paid off and how much interest you will pay over that time. The website is:

http://www.infochoice.com.au/distributions/asic/calculators/creditcard/index.asp

Free download to help speed debt reduction

I discovered that I will save $189,301 and nine years of debt thanks to a debt reduction calculator I downloaded for free on www.download.com. The calculator is an excellent Excel spreadsheet that lets you type in how much you owe, your monthly repayments and interest. You then type in how much extra you can afford to pay towards your debts and the program shows you the best way to pay them off. You also get a month by month payment schedule.

There are many websites that let you download all types of software for free, or at least for a free trial period. They are well worth the time it takes so check them out.

http://www.download.com and http://downloads.zdnet.com

You will need to type ‘debt reduction calculator’ in the search field.

It pays to ask

My debts were reduced by $200 after I asked to pay them off early. I was making regular payments to a mercantile agency to pay off my credit card. I rang to find out how much was left to pay and was told it was $525, so I asked if they would accept a payout figure and they agreed. Instead of $525 I paid $325, a big saving for a pensioner. It is worth asking for what you want - you never know what you can save.

Make your own money tree

An Adelaide woman has written a terrific system for getting out of debt and building wealth. She is Diana Mathew and her book is 'The Money Tree'. She was in an appalling situation herself and this is the system she developed. She now helps people work out their own best solution and remove the worry and tension from their lives. Highly recommended!

http://www.mymoneytree.com.au

Minimum payments led to debt-free

I have finally discovered the secret to becoming debt-free! A couple of years ago, before joining Simple Savings I was looking for ways to get my finances into order. I signed up to buy a pack that would tell me how to get it all under control. Eighty dollars and two months later a package arrived and I sat back ready for the meaning of life to be revealed to me. While the information was great, the folder was long winded and could have been given in one small letter. On the positive side however, once I had the answer, it was so simple that I was actually able to achieve it with minimum fuss!

The answer given was to put all of your bills on the table in front of you. After working out your budget, you can then use the following method to find out what you can afford to pay out with what you have left over.

1. Place your bills in order from the smallest amount to largest.
2. Pay the minimum payment on all bills except the smallest bill
3. With this smallest bill, pay as much as you can off it until you have paid it off.
4. Then move to the next smallest bill and put the money that you USED to pay for the bill you have just paid off onto that bill as well until the next is paid off.

All the while, just keep paying the minimum payment on the rest of the bills. Keep doing it this way until you have paid them all off!

I followed this advice until I had paid off several store cards and a hefty credit card. The only bill I have to pay these days is my home loan!

Settle your debts for less

I would like to suggest another way for people to spend their tax refunds. Debt collection agencies usually accept settlement deals for less than what the debt is worth. Most collection agencies purchase debts for between 10 and 30 cents in the dollar and will therefore settle the account for less. Offer them between 50% and 75% and they will usually accept it or, at the very least, come back with a figure of less than what the debt is worth.

Speaking up saves $2192 in one day

I have saved a massive $2,192 on my credit cards, bank fees, phone and Internet costs simply by asking a few questions! I have two credit cards that I am working at paying off, one at 19% interest (Gold card) and the other at 11.99% (MasterCard). The balance on the Gold card was much higher than the MasterCard, so I called my bank's customer help line and asked if I could swap the lower MasterCard balance to the Gold card and vice versa. The answer was no. Determined to reduce my Gold card debt, I set up a meeting with my bank manager who, after chatting to the bank's head office, gave the go ahead to swap balances. So by pursuing what I wanted and making the effort to see my bank manager in person, I saved $1,421 in interest and $71 in bank fees for the year!

Feeling empowered I decided to see if I could get a better deal on my phone and Internet costs. I went through a recent phone bill and rang the company to query a few items, only to find I had been overcharged $120! I went on to ask what else the company could do to help me and came away with a home phone, mobile and Internet bundle deal which saves me $40 a month on Internet costs for the first nine months, and gives me 50 free calls a month (another $9 saving). I also asked how I could get half price Internet for a further three months and was advised that by switching to paperless billing I would be eligible. All this just because I asked! This saved me around $700 annually!

Although I'm happy I saved myself a total of $2,192 in one day, I'm angry that I wouldn't have been offered these savings if I had not pushed a bit and asked the questions. It goes to show that customers should not be afraid to ask for what they want and question what large companies charge them.

Speedy debt reduction

This year, our family's goal is to reduce our large credit card debt. To take the sting out of this debt repayment, I now pay money off both credit cards three times each month.

First, I set up a direct weekly payment from my main bank account to each card. We don't miss the money as it comes out automatically, and I don't have to think about paying it.

Second, I pay the minimum payment on both cards when they fall due, treating it like any other bill and disregarding the fact that I've been paying extra money each week.

Third, after the mortgage comes out at the end of each month and I assess what essentials we need to buy the next month, I work out a budget for that month and pay as much money as possible as a lump sum. I deliberately keep it tight so we have to work hard to stretch our money next month.

By attacking our debt from many different angles, we're cutting it down much faster than we would by simply paying the minimum monthly balance.