Every month across the country Canadians get their credit card statements and make monthly payments to pay off the debt. Unfortunately, it seems the balance never changes thanks to the high cost of revolving interest. It doesn’t help that many are living paycheque to paycheque and have no extra cash to throw at debt repayment. It is possible to pay off credit cards over time but it requires knowledge, planning and sacrifice.
1) Know What You Owe
It’s amazing how many people have no idea exactly how much they owe and to whom. Gather all bills, face reality and breathe. Did you know the exact date each month the payments was due? Did you know what interest rate you were being charged if the balance was not paid in full? Educate yourself. Ignoring debts will not make them vanish. Knowing amounts and due dates can help you make an action plan
2) A goal without a plan is a wish
Prepare a monthly (or even weekly) spending plan. List all income sources then deduct essential expenses for that time frame. The key word is “essential” not wants. The left over balance can be used to pay down the debt as fast as you can. The day you get paid transfer this amount to your credit card payment before use any of the rest. Make paying down the debt a priority. The faster you pay the more money you save! Systematically pay as much as you can. Vacation pay, a bonus even a tax refund can be put to good use.
3) Stash the Card
You will never put a dent in the debt if you continue to use the card. It may seem impossible to live without the credit card safety net but remember the card is extra debt not extra income! Stop the bleed. If you don’t have it, you can’t spend it. Saying no to purchases may seem stifling but it is necessary. You must learn to live within your means.
4) Don’t be Fooled
Credit card companies do not want you to pay off the debt. They make money on the interest you incur. They want to see you happy and getting everything in life but at a profit. In fact, they would prefer you get a second card to pay off the first card. Why? They know that you will likely pay off one but keep both and continue to use both. Learn to say “no” and be in control.
5) Think Outside the Box
Consider transfering balances from a high interest card to a low interest card or line of credit. Consider liquidating assets like a TFSA to free up cash to pay off balances. If you can you increase your income, put the extra pay towards debt. Use credit card reward points to pay off credit card balances/payments.
Most importantly, if you find yourself going nowhere, it’s important to seek advice from licensed debt professionals who is the legal expert in options such as consumer proposals and bankruptcies. Having an expert evaluate your finances and lead you in the right direction is priceless for the future you.