Consumer Credit Counselling Advice: 6 Ways to Manage Credit Card Debt
Credit card debt has become more and more prevalent in recent years, among Canadians. To help you stay on track with your financial obligations, our Licensed Insolvency Trustees and consumer credit counsellors offer 6 suggestions for managing your credit card debt:
1. Pay More than the Monthly Minimum
Minimum payments often cover only part of the interest—meaning none of your payment goes towards paying off your actual debt. It’s a self-defeating cycle – as long as you pay only the minimum payment, you will owe more the following month.
Every dollar over and above the minimum payment goes towards paying down the balance of your debt, which reduces future interest and may lower the minimum payments moving forward.
It helps to think of payments beyond the minimum as an investment: every dollar invested ‘pays out’ in interest that you avoid having to pay!
2. Consider Personal Lines of Credit, but Only in Conjunction with Discipline
Opening a lower-interest personal line of credit to pay off your high-interest credit cards can potentially be a great idea. You can use this lower-interest account to pay off your credit card debt, and then work towards paying off the line of credit instead.
However, keep in mind that a line of credit won’t solve any overspending that got you into debt trouble in the first place.
By budgeting more carefully to curb your overspending, the line of credit can give you relief from the more expensive ‘minimum payments’ of high-interest debt, making it far easier and faster to pay off.
3. Come Up with a Long-Term Plan
It often helps to write down all your debts to determine the quickest and most effective way to pay them off.
Most people have several sources of debt—credit cards, student loans, mortgages, car payments, etc. Order the debts by interest rate, with the highest taking first priority to pay down.
Every month, once you’ve made the minimum payments for each source of debt, take what you can out of your remaining funds and put it towards the one debt with the highest interest rate.
Once that debt is clear, keep working your way down the line. As your minimum payments start to shrink, the amount of money left with which you can pay down your debts will increase, and, with a little time and discipline, your debts will eventually be resolved altogether.
4. Consider Debt Consolidation
If you have a lot of high-interest debt, debt consolidation can be a great way to alleviate your debt while keeping your interest rates low. To learn more about how Fuller Landau Debt Solutions can help, visit our debt consolidation page.
5. Consider Credit Counselling
If you find yourself continually incurring more credit card debt than you can manage, you should become familiar with financial tools, knowledge, and resources that are available. Credit counselling in Toronto with a qualified Licensed Insolvency Trustee can help you uncover a number of strategies and solutions to adjust your spending habits, potentially saving you from further debt.
6. Once You’re Out of Debt, Pay ‘Out-of-Pocket’, Not ‘Off the Card’.
The easiest way to manage credit card debt is to avoid it in the first place. Once your credit card is paid down, start relying on cash or your debit card instead, saving the credit card for online purchases or emergencies only. If you do end up using your credit card, make sure you have the funds available to pay it off immediately.
It’s not always possible to stay completely out of debt, but with a little discipline, you can keep your debts under control.
To learn more about consumer credit counselling or other debt solutions like Consumer Proposals or Bankruptcy, call us today for a free consultation with one of our experienced Licensed Insolvency Trustees. We’re here to help you get a fresh start and lead a FULLER life.