See how long it takes to clear a credit card balance.
A minimum repayment is typically a small percentage of the balance, so as the balance falls the required payment falls with it. The debt shrinks more slowly the further you get, which is why a balance repaid at the minimum can take many years and cost more in interest than the original purchases. Setting a fixed monthly amount instead of the minimum changes the trajectory sharply.
This matters beyond the card itself. When you apply for a home loan, most lenders assess your credit card as though the full limit is drawn, regardless of your actual balance. An unused card with a high limit can reduce your borrowing capacity by many times its limit. Reducing or closing cards before applying is one of the fastest ways to improve the assessment.
Rolling card debt into a lower-rate personal loan or a home loan can reduce the interest cost, but only if the cards are then not re-used, and folding short-term debt into a 30-year loan can cost more overall even at a lower rate. The structure has to come with a change in behaviour to be worth doing.
A calculator gives you a starting figure. What a lender will actually approve depends on your income, expenses, credit history and the property, and it varies between lenders. We compare more than 40 lenders on our panel and will tell you where you genuinely stand — see our home loan, refinancing and car loan services, or the suburb pages for Werribee, Tarneit and Point Cook.
Reducing the limit or closing the card usually improves your assessed borrowing capacity, because lenders assess the limit rather than the balance. Whether it suits you depends on your circumstances.
It can lower the interest rate but extends the debt over a much longer term, which can increase total cost. It only works alongside a change in spending.
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