Canada’s love affair with debt continues, and it is getting more serious than we imagined.
Canadians may be carrying fewer credit cards, but they are carrying higher balances. Today, total outstanding balance stands at just under $95 billion. The average consumer now carries a credit card balance of approximately $4,000. Moreover, the delinquency rate is inching higher as it has reached 4.21 percent. There are no signs of Canada’s fixation of credit slowing down.
With interest rates inevitably going up – whenever the Bank of Canada (BOC) decides to raise them – it will be harder for households to service their debt. Indeed, many Canadians will be underwater and they won’t be able to afford the simplest of pleasures in life because of debt.Fortunately, before things get too much out of hand, you can employ a series of measures that can reduce your credit card debt now so you won’t pay a significant price later.
Here are five tips for eliminating your credit card debt:
1. Pay Off Cards with High Interest Rates First
The average consumer has about two to three credit cards. It is fair to say that all of those credit cards have different rates of interest, especially those with cashback rewards or Air Miles.
When you have accumulated too much debt on all of those credit cards, you should start off by paying off the cards with the highest interest rate first (you should also make the minimum payment on the other two cards). This way, you eliminate one credit card with extra interest.
2. Consolidate Your Debt Right Now
In the last few years, you have lived beyond your means. You have racked up enormous credit card debt, you still owe one furniture company for that bedroom and dining set and your behind in your telecommunications bill. This is becoming all too overwhelming.
Should you realize that you are unable to pay off the full balance of all of your credit card debts in a short period of time, it would be wise to consolidate your debt as soon as possible. You can speak with a credit counselling service that will speak with your lenders. This helps because you reduce your total balance without having to fork over extra interest.
3. Never Use Your Credit Cards
Once you begin to pay down your credit cards – and eventually wipe out that debt – you should refrain from using your credit cards. That’s right. Instead of relying on plastic, you have to return to the archaic method of payment: cash and coins. It may not be as convenient as tapping.
Unless you master the art of using credit cards, you will need to resort to physical money.
4. Cut Your Spending & Allocate Those Savings
Remember when we mentioned that you have lived beyond your means? Well, if you don’t believe us then take a look at your monthly expenses. You’re spending $5 a day on lattes, $60 a month on a gym membership, $1,500 a year on cable and the list goes on and on.
The best course of action is to slash your spending and then allocate those savings to paying off your credit card debt. If you stop splurging $25 a week on lattes, put that towards you Visa card.
5. Can You Liquidate to Lower Your Debts?
Did you grandparents give you a government bond worth $10,000 for your graduation? Do you have mutual funds that have been performing rather well in the last couple of years? What about that tax-free savings account (TFSA)? Simply put: can you liquidate your assets?If it is possible, you should use some of your savings to pay off your credit card debt.
A credit card is a necessary evil, but it is also the bane of our existence when not used correctly. If you are someone who puts everything on the credit card and spends more than you earn then you will inevitably get trapped into unpayable debt. This is the same old story for so many of us.Although it was easy to accrue so much credit card debt, it is harder to get out of it.
With a little bit of sacrifice, dedication and hard work, you can pay off all of your credit card debts and live a stress-free live moving forward. That is, as long as you live within your means!