Despite everyone’s best intentions, many of us end up carrying credit card debt from time to time. In fact, in aggregate, Canadians owe around $85 billion in credit card debt at any given moment. That’s not an insignificant number.
If you’re carrying high interest credit card debt, don’t panic. There are plenty of options to help you get control and get out of debt. Here are 8 tips, that depending on your individual situation, should help you get back on track.
Stop Spending More Than You Have
For the shopaholics, materialists and budget busters the cure is pretty simple – get hold of yourself. Set a monthly budget, and don’t spend more than you make. The faster you realize you’re not a Rockefeller, the easier it will be for you to live within your means, jump off the treadmill and stop playing catch-up with your neighbours.
Don’t Stop Paying Your Credit Cards Down
Whether your debt is carrying a high interest rate, or a 0% interest rate is irrelevant. Always pay down as much of your credit card debt as you can afford, each and every month. The more often you pay, the less chance you’ll give your debt to build on itself.
Procrastinating, a common stress response, will only cost you money. Giving up will ruin your credit score, and make your future options even worse than your current ones.
Consolidate Onto a Low Interest Balance Transfer Card
If you have balances on multiple high interest credit cards, you’re in luck. You can get a credit card that transfers your high interest balances, to a lower interest credit card. There are plenty of balance transfer offers in Canada, with some offering rates as low as 0% for 12 months, with a negligible 1% transfer fee. Use your interest free year to pay down as much of your principle as you can, to get ahead of the game.
Negotiate With Your Credit Card Company
Believe it or not, calling your credit card company and asking for a rate reduction can work magic. Often times issuers will knock 5% or more off your interest rate, just for asking. It doesn’t hurt to ask, and the worse that can happen is they say no. That said, the best credit card companies are willing to work with you, to ensure you don’t go delinquent or charge-off – it’s in their interest to do so. Some banks even have a low interest credit card option that you can request.
Use Your Home Equity Line of Credit
Interest rates are at a historical low. Credit card rates rarely reflect the variability in interest rates, but mortgages do. Moreover, because your home equity line of credit is secured by your home, it will reflect an even lower rate than unsecured loans. Take advantage by paying down your high interest debt with your home equity line of credit. Just make sure you don’t default, because if you do, the banks get your house.
Get a Personal Term-Loan
While personal loan interest rates typically aren’t as attractive as balance transfers or home equity lines of credit, some personal loans in Canada can be a good option for those who want to consolidate their debt and pay one fixed monthly fee until their debt is paid down completely. That said, beware of super high fees hidden in the fine print.
Pay Down The Smallest Debts First
Sometimes getting control is the first step. In light of that, paying off your smallest debts first helps eliminate the number of payments you have to make. Getting rid of a series of small debts restores order and a sense of success, encouraging you to continue making payments on time.
Pay Down The Highest Interest Credit Cards First
If there’s a large discrepancy in the interest rates of your credit cards, it always pays to knock off the highest interest rate balances first. Whether the balance is small or large, paying off the higher interest balances first will save you the most money over the long term and will also allow you to become debt free faster.