How to Pay Off Credit Card Debt
Some things in this world are very fast. A peregrine falcon or a cheetah come immediately to mind. For plant lovers, maybe you would think of fast growing bamboo, or more locally, bull kelp. However, nothing can compare with how fast interest on credit card statements can grow! It seems that even if you make a big payment, the interest charge on the next statement is barely reduced and the balance is virtually the same. This can be very depressing. For those who have multiple credit cards, it can quickly become apparent that the choice to leave a balance carry over each month created a fast growing interest problem.
And how easy is it to get a credit card? Congratulations you’re pre approved! It can come in the mail or be in your face while you are walking in the mall or offered to you when you are checking out of a grocery store. All of a sudden, you could find yourself with four or five credit cards, or more, all with some sort of a balance. In these settings, taking action sooner rather than later is important.
One strategy to reduce credit card debt is to focus on paying off your credit card with the smallest balance first. This can feel good to accomplish, reduce the amount of statements you are receiving, and build some enthusiasm to take on the next credit card. This would also require taking a good hard look at your budget and eliminate frivolous spending in order to redirect those funds on to the credit card debt.
Another strategy is to try and obtain a consolidation loan from a bank or a credit union. Use the loan to pay off all of the credit cards which will result in just having one payment on the consolidation loan. Just make sure that the interest rate on the consolidation loan is lower than the overall interest rate on the credit cards.
If a consolidation loan is unattainable, a Consumer Proposal could be an answer. This federally approved and regulated program is administered by Licensed Insolvency Trustees (LITs) and is available for Canadians from coast to coast. Once a Consumer Proposal is in place, the interest charges on the credits cards are stopped! In addition, the credit card companies and their collection agencies are not allowed to contact you. And best of all, they will often agree to repayment terms that are substantially less than what is owing. The exact terms of a Consumer Proposal will vary depending upon such factors as your income, assets, and family situation. Credit cards often agree to accepting a Consumer Proposal because if they didn’t, a person also has the option of obtaining personal bankruptcy protection.
While some of these terms may sound intimidating, make an appointment with a LIT and ask questions. We offer a free initial appointment where we will go over your situations and explain how the different options work. In our experience, once you find out the details, financial stress will leave your life and so will your credit card debt! Why not make that first appointment, it’s free!