Credit Cards, when used correctly, can be very useful.
They can help you out of a financially tight spot while you’re waiting for payday.
They can afford you all kinds of cool benefits and rewards.
But let’s be honest.
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Very few of us have the luxury of being able to repay our Credit Card balances in full every month.
In many cases, Canadians have several active Credit Cards at once, each of which has a different balance and a different rate of interest.
In this light, it’s little wonder that the average Canadian household carries almost $21,000 in non-mortgage debt, and spends almost 15% of their disposable income on repayments (almost half of which is subsumed by interest).
Here are 5 tips that will help…
1- Start out with a spending plan
All too often, we find ourselves needing to rely on Credit Cards because we haven’t taken control of our finances.
One of the first things you should do is download a Household Budget Template.
This will help you to keep track of all your household spending, identify areas of wasteful expenditure and plug up any leaks.
You may be surprised to learn just how much of your disposable income goes to waste because you’re not keeping track of it.
Everything from your coffee shop latte on Monday morning to beers with the team on Friday evening can put a dent in your household cash flow and leave you with less money to pay down your debts.
Not to mention all those subscription and streaming services.
A spending plan makes your finances more transparent and makes it easier to prioritize your debt repayments.
So you’re much less likely to lean on your Credit Card, and able to repay your debts faster.
2- Only carry one major Credit Card
Credit Cards, store cards and other forms of credit are designed to be appealing to consumers.
They’re made to look like exactly what they aren’t… free money!
As such, we can get into the habit of taking on more and more cards because we’re tempted by the incentives, the enticingly low rate of interest and the low-low monthly repayments.
What we don’t stop to think about is how most of those low-low repayments is made up of interest.
Or how we could be paying down as little of $10 a month of the principal debt.
Or how our debts can last for decades under these terms.
What’s more, when low introductory offers on interest expire, rates can shoot up dramatically and your principal can become much harder to repay.
Especially if you’re still only making the minimum repayments.
You only ever need one major Credit Card.
The more cards you have, the more interest you could end up paying, and the more vulnerable you make yourself.
3- Avoid taking your Credit Card with you wherever you go
Wherever you take your Credit Cards, you also take the temptation to use them with you.
Credit Cards allow you to defer payment, and this may encourage you to make purchases that you might not make if you were living on an all cash diet.
While one or two small purchases might not be too problematic, these purchases can quickly add up.
Even if you’re trying to build credit using your card, you should use it sparingly and deliberately.
Never make a purchase on a card that you would not be happy to make with cash or your debit card.
Leave your cards at home, and you won’t be plagued by the temptation to use them.
4- Never lend your card to anyone
Getting out of debt requires self-control and discipline.
And while you may be able to reign in your own spending, it’s much harder to reign in others’ impulse spending when you’ve given them access to your credit card.
Even if you didn’t make the purchase, if it was made on your card you are still legally liable for the debt.
So make sure that only you have access to your cards.
5- Start saving now
One of the most common reasons why credit card debts spiral out of control is because their users become over-reliant on them.
When unplanned expenses occur, and they don’t have enough in their current account or savings to cover them, the credit card becomes the only option.
However, when you have a cash reserve in place, or a healthy savings account, you no longer need to rely on credit to get you through short term financial hardship.
You may assume that your finances aren’t conducive to saving right now.
But with proper budgeting, you’ll be able to eliminate wasteful spending and prioritize debt repayments and saving.
So you can not only get free of debt faster, you can ensure that you’re self-sufficient enough not to need to rely on your Credit Card to get you out of a tight spot.
Of course, that’s not to say that you should necessarily cut up your cards.
But you’ll find it easier to make them work for you, rather than the other way around.
Need a hand getting Credit Card debt under control? We’re here to help!
Are you struggling to keep your Credit Card debt under control?
Does it feel like your outstanding balance remains the same, despite you forking out a small fortune in repayments every month?
You’re not alone.
Fortunately, we’re here to help.
Since we first opened our doors in 1999, we’ve helped over 200,000 Canadians from all walks of life to take control of their finances, get the fresh start they deserve and live free of debt.
Want to know more?
Get in touch with us today on (877)879-4770. We’ll be happy to arrange a free, confidential and 100% zero-obligation callback.