With their super easy payment capabilities (a tap of the card here, a touch of the phone there), it’s easier than ever to rely on a credit card to pay for things… and pay for things… and pay for things. Until one day, you realize you’re carrying a large balance month to month, and you can’t seem to get ahead. You’re not the only one:
- The amount of debt held by Canadian households has been steadily rising over the last 30 years and has now reached record levels
- A recent poll* finds that more than half of Canadians live paycheque to paycheque, while a third can’t afford to pay off their credit card balances
- Household debt is especially soaring among young Canadians
It’s important to tackle credit card debt for one huge reason: the interest. If you were to chip away at a $1,000 credit card balance (with a 19.99% interest rate) by only making the minimum monthly payment, it would take over ten years (!) to pay off the balance. The reason is mostly due to the interest compounding on the balance owed, making it the biggest thing you end up paying, and not the original purchase itself.
When it comes to credit card debt, you know that you’re not alone, and you know why it’s important to pay it off. So make today the day you start tackling the debt with these tips:
- Make a payment right now, even if it’s $10, $50 or $100 dollars. This will kick start your new payment strategy and set the tone of “getting things done.”
- But don’t stop there! Next is getting into the habit of paying more than the minimum amount due. That way, your contribution is paying down the balance, and not all going towards the interest.
- You might be wondering how you can find the extra funds to pay more than the minimum amount. Personal Financial Management (or PFM) intel can help. If you’re a Coastal Community member, the Spending Analysis feature on your online banking will break down where you spend your money. Is a lot going towards entertainment or dining out? Consider redirecting some of these funds towards your credit card bill.
- Bundling your outstanding credit card debt into a consolidation loan might also be a worthwhile option. The benefits:
- You only have to make one monthly payment
- It tends to have a lower interest rate
- It’s way easier to keep track of
- You can also look at transferring your credit card balance to a lower rate card. If you choose this option, make sure you’re aware if it’s only an introductory rate, or if there are any additional fees for transferring over.
When it comes to tackling credit card debt, the outstanding balance isn’t the only thing that needs changing—behaviours do too. Those who have successfully climbed out of debt have gotten into the habit of making diligent, punctual payments. They’ve also committed to tracking their expenses so that they’re not spending more than they earn, and re-directing extra funds to paying down their debt.
When it comes to overcoming credit card debt, prepare for small setbacks along the way or a few growing pains as you try new things. But also awaiting you is that deep breath of relief you’ll take when you see your outstanding total become lower and lower.
*BDO Canada Ltd. poll