Credit cards can kill your portfolio, say experts

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Mortgage holders have been warned that credit card debt is the major obstacle to paying off their home loan quicker. 

The interest paid on credit cards, which still sits at around 20%, is the ‘biggest killer’ of people’s ability to make extra mortgage repayments, according to Smartline Personal Mortgage Advisers.

“Using a credit card and not paying the balance in full every month is a real impediment to getting ahead financially,” said Smartline executive director Joe Sirianni. 

“The very high interest paid on credit card debt – which can quickly start to put a large dent in people’s household finances – is what we most often see holding people back. 

“Buying things today that you can’t really afford with credit cards means you’re spending tomorrow’s money and tomorrow’s extra home loan repayments, which is costing you future financial freedom and opportunities. 

“For those people who have given their credit card a beating in recent weeks or months, and who will be starting 2013 with significant credit card debt, your number one goal should be to get that debt reduced and paid out as quickly as possible.” 

With credit card interest rates more than three times those of a home loan – about 20% compared with about 6% – every $1 pays off three times more home loan debt than credit card debt, making it much more powerful. 

“If your use of credit cards… is starting to impact on your financial wellbeing, there’s merit in talking with a quality mortgage adviser about your options in terms of consolidating this debt so you can pay it out as quickly as possible,” Sirianni said. 

“That means using your credit cards sparingly, paying out the balance every month and putting as much money as possible into your home loan.” 

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