Do you have a credit card? Do you have more than one? Most Canadians need to use credit cards in order to start building their credit. However, unless you know how you use them responsibly credit cards can be a slippery slope into mounting debt.
In April this year Statistics Canada released details on a study they did on household debt. The average household non-mortgage debt among homeowners was $18,100. Households that had a positive outlook for the future had an average of $6,800 more non-mortgage debt that other families with a neutral or negative outlook for the future. The conclusion was that families who were expecting a pay raise or a bonus had higher debt-to-income rations compared to other families and were more willing to increase their spending or go into more debt before the additional funds actually arrived.
If you find yourself with more non-mortgage debt than you feel you can handle, you’re not alone. If you want to find a way to handle your debt more effectively it’s time to consider credit card debt consolidation. This is when you transfer all of your non-mortgage debt to a consolidation tool like a line of credit, a home equity line of credit (HELOC), or a low interest or balance transfer credit card. Regular credit cards have an average interest rate of 19.99% but these consolidation tools have a much lower interest rate of about 5% (or lower.) Balance transfer credit cards can even have a temporary promotional interest rate of 0%! Imagine being able to make credit card payments for 3-6 months knowing that every dollar is going toward your balance and not the interest. You won’t have to worry about juggling multiple payments or prioritizing them. Plus, any extra payments you make will help hack away at your debt, free of any penalties.
Stay on target
Once you’ve chosen your debt consolidation tool make sure you use it to it’s potential. Don’t get sucked into the temptation to start overspending again. If you know you’re likely to do this then protect yourself by lowering your credit limit as you pay down your debt so that you can’t add more debt to what you already have. You can even cancel your credit card altogether while you continue making payments. If you really want to stay on target, print off your repayment plan and put it up somewhere you’ll see it on a regular basis and be able to track your progress. Seeing your goal laid out every day will remind you to stay focused.
Paying off your debt is only the first part of the solution. The next step is to take an honest look at yourself and your spending habits. How did you get here in the first place. Unless you can answer and solve this problem you’re likely going to end up back in debt over and over.
To discuss credit card debt consolidation ideas and find out which one is best for you contact us today.