How to pay your credit cards faster?
Paying a little more than the minimum payment each month, paying off debt before saving, reviewing your budget, prioritizing repayment of cards with the highest interest rates, etc.
According to the Canadian Payments Association , payment by credit card has increased by more than 7% annually since 2008. This growth is explained by the ease and speed of using the credit card as well as by the advantages commercial offers offered by the various credit card companies.
In the same context, a recent study by the financial institution Transunion indicates that there are approximately 43 million credit cards in operation in Canada; a figure higher than the population since each individual can have several cards.
Faced with this massive and sometimes irresponsible use, 40% of Canadians are unable to pay their credit card balances at the end of the month, as reported by the Canadian Bankers Association . By adding the high interest rates and the accumulation of debts on several cards, the debt situation becomes more and more complicated.
Fortunately, there are several options available to you to improve your financial situation and pay off your credit cards more quickly and with peace of mind .
What is Credit Card Debt?
Your credit card debt is the amounts spent with your card without being able to repay them within a given billing period.
The way credit cards work tells us why this payment tool becomes a heavy load of debt. In fact, these cards allow you to spend hundreds or even thousands of dollars in credit and in the event of non-payment, the interest rates accumulate and increase the amount owed.
Credit card debt represents 5.5% of the total debt of the population in Canada , with residential mortgages making up more than two-thirds.
Here are some practical tips you can implement in your financial strategy to make it easier to pay off your credit cards:
PAY A LITTLE MORE THAN THE MINIMUM PAYMENT EACH MONTH
The minimum monthly payment is not enough to get rid of credit card debt. If one is satisfied to pay only this amount, the refund will be very long and much more expensive with the accumulation of the interest rate.
So try adding a small amount to the minimum payment. Even twenty dollars could make a big difference in the long run. To find out more, simulate your monthly payments on this credit card payment calculator that offers you 3 options: minimum payment, additional payment and fixed payment.
PAY OFF YOUR DEBTS BEFORE SAVING
If you are used to putting a sum of money aside and you still have amounts due on your credit cards, favor repayment before saving to limit the inflation of the interest rate and get rid of your debts more quickly. debts. The difference is clearly clear between the credit card interest rate (20%) and the investment rate in case of savings (5%).
REVIEW YOUR EXPENSES
If you really want to pay off your credit cards fast, you need to re-budget. Do not neglect any daily expense in your review (transportation costs, catering, clothing, entertainment, alcohol, tobacco, etc.).
START BY PAYING OFF THE CARDS WITH THE HIGHEST INTEREST RATES
When you have the capacity to repay your debts, don’t make the mistake of paying off low balance cards in order to reduce the number of creditors. The wisest thing is to prioritize the cards with the highest interest rates. When you focus on these cards, you limit the impact of compounding interest rates over time.
ANTICIPATE YOUR PAYMENTS
In an effort to expedite credit card repayments, don’t wait for the monthly statement to pay. As soon as you have a good amount of free money, transfer it to your card balance before it is spent elsewhere.
ASK FOR A LOWER INTEREST RATE
If you are in a difficult situation of over-indebtedness, you can request an interest rate reduction from your financial institution. Given the competitive market between the different credit card companies, your institution could accept your request, especially if you make regular payments.
CONSIDER CONSUMER PROPOSAL
If you are unable to repay your credit card debt despite optimizing your budget strategy, it is recommended that you contact a trustee in bankruptcy to manage your consumer proposal file .
This financial solution consists of consolidating all your debts into a single monthly payment adapted to your budget. Unlike the declaration of bankruptcy , the consumer proposal protects you against the seizure of your wages and your property. This procedure offers you several advantages:
DEBT CONSOLIDATION LOAN
It is an unsecured personal loan that allows you to pay off all balances due on your credit cards in one monthly payment at a lower interest rate. However, to benefit from this consolidation loan you must have a good credit rating, especially for large sum requests (greater than $30,000).
DEBT MANAGEMENT PROGRAM
The goal of a debt management program is to consolidate all your debts into one affordable monthly payment. This program represents an optimal alternative for those who have a large debt to consolidate and who seek the support of a credit counselor .
