Although they’re a convenient payment tool and extremely common form of credit, many people end up struggling with credit card balances – sometimes for years and even decades. Whether you’ve recently made it a personal goal to pay off your credit cards or you’ve long struggled to see a zero balance, there are a few strategies you can consider to help get your credit cards paid off.
BC Licensed Insolvency Trustee Blair Mantin joined Global News to share some debt expert tips and insights into paying down credit card debt – watch the clip here and read more on managing credit card debt below.
Tackling Your Credit Card Debt? Consider These Tips to Get Out of Debt Faster
Staying ahead of accruing interest charges is one of biggest keys to successfully paying off debt, especially credit cards. The longer a balance is kept on each credit card, the more expensive purchases truly become – and getting out of debt that much more difficult. To help keep the costs down and maximize your progress:
- Always Pay More Than the Minimum Required, and Always Pay on Time
Making just the minimum monthly payment required on your credit card balance each month can keep you stuck in debt for years. Aim to always pay more than the minimum payment required each month, even as little as $5-10 extra can help you shave years (and dollars) off your time to debt freedom.
- Minimum payment requirements can fluctuate if they’re based on a percentage of your overall balance – even when the minimum payment starts getting lower keep paying as much as you can afford. (i.e. If you started at $155 a month, continue with that – or more.)
- Make extra payments throughout the month if you can, this can help some of the balance from accruing more interest.
- Don’t skip payments or pay late! Doing so can incur extra charges and penalties, and you may even lose the benefit of lower interest rates.
DEBT WARNING SIGN: Making only the minimum payment on your credit card means very little is going towards the balance, nearly all is allocated towards servicing interest charges or fees, you can easily exceed credit limits when interest charges start outpacing the payments you’re making. If you’re unable to pay more than the minimum monthly payments it may be a sign of a more serious financial problem.
- Ask For a Lower Interest Rate
What might look like a small reduction can make a big difference toward helping you pay off your credit card debt for good. If you’re comfortable advocating for yourself, connect with your credit card issuer and find out what they can do for you. This strategy isn’t for everyone but can be effective particularly in situations where balances are low, you’ve always paid on time, and/or you’re a long-term customer.
- Do a little preparation before you call. It can be helpful to have some comparisons of interest rates so you’re aware of what other companies are offering.
- Try to stay calm, straight forward and polite with your approach.
- If you have more than one credit card and one has a lower rate than the other, you may want to consider transferring the balance on the higher card to the lower-rate one.
- Be sure to find out about any costs or fees charged before completing this transaction.
- Clarify whether rates are only temporarily or ‘promotional’ terms.
Be Careful About Using Credit as a Debt Solution
Proceed with caution when using balance transfers, consolidation loans or other types of borrowing to deal with debt. Some common pitfalls to lender solutions can include:
- Unaffordable (or lengthy) monthly repayment terms, sometimes due to expensive interest rates.
- Borrowing requirements such as holding assets as collateral or bringing in a co-signer.
- Continuing to use credit or taking on more debt than was needed.
It’s important to understand all the details and costs before proceeding and be aware that many people will not qualify for lender help with consolidation and other borrowing solutions.
Do Your “Rule of 60” Math: Add up your total (non-mortgage) debt then divide that number by 60.
- Is that figure a monthly payment you could consistently afford to pay so that you’ll have your debt paid off in 5 years (60 months)?
- If it’s not, or you think it would be very difficult to manage, you may want to check into solutions that have a debt forgiveness component to consolidation, like a Consumer Proposal.
- Pay Off Credit Cards with the Highest Interest Rate Charges First
If you’re continuing with self-guided payments and dealing with multiple credit cards, you may want to prioritize which card you work on paying off first, depending on the interest you’re being charged.
- Make a list of all your credit card debt, with the highest interest debt at the top.
- Decide how much you can pay each month over the minimum monthly payment requirements.
- Make all your monthly payments on each card, paying the extra money on your high-priority (highest interest) card.
- Once the first card is paid off, move the extra payments on the next one – rinse, repeat!
Or some people find it easier to stay motivated with a build-up approach where you will instead Focus on Smallest Balance Debt First:
- List all your credit card debts, with the smallest balances at the top.
- Make all your monthly payments on each card but use the extra money to pay off a card at a time, starting with the smallest balance debts first.
It can be discouraging when you’re making a lot of effort to pay off your debt but debt-free still feels far away or out of reach. Remember that you are not alone – and there are other solutions you can access.
- Consolidate and Cut Credit Card (and other) Debt with a Consumer Proposal
A Consumer Proposal is a debt management tool that allows you to consolidate credit cards as well as virtually all other debts, without borrowing. With a Consumer Proposal you can cut debt down to what is affordable (often by up to 50-80%!), and creditors agree to write-off the unpaid balances.
- No borrowing also means no more interest is charged, nor are there any added professional fees to pay out of pocket.
- Unlike consolidation loans that often have high monthly payments and can be difficult to qualify for, your credit score and history are not eligibility factors to making a Consumer Proposal, and you won’t need to risk an asset or a co-signer’s guarantee.
- Consumer Proposals generally have the lowest monthly payments of all debt management strategies, making them an affordable option to consolidate everything from credit cards to overdrafts, lines of credit to student loans, tax debt and more.
If you’re feeling overwhelmed by credit card or other debts, connect with a Licensed Insolvency Trustee and get professional debt advice. There are legal debt solutions that can help you manage virtually all types of debts, and we can help you assess your situation, compare all your options, and work with you through process such as making a Consumer Proposal, or even declaring personal bankruptcy.
Credit card debt doesn’t have to be a way of life forever – connect with a friendly Sands & Associates debt expert to discuss a debt-free plan to help you move forward. Our non-judgmental consultations are always free and confidential, book yours now.