Newspaper article The Canadian Press

Key Steps to Getting out of Credit Card Debt as the Cost of Borrowing Rises

Newspaper article The Canadian Press

Key Steps to Getting out of Credit Card Debt as the Cost of Borrowing Rises

Article excerpt

Key steps to getting out of credit card debt

--

The Bank of Canada's latest rate increase has raised the cost of borrowing as well as the importance of paying off debts.

Credit cards often carry interest rates in the double digits, some of the most crippling in the debt world, so anyone carrying a balance on one should make it their top priority to pay off -- even if the big banks' decision to raise their prime rates doesn't directly impact credit card rates, said Credit Counselling Society president Scott Hannah.

"If a person is regularly carrying a balance on their credit card, that's a problem," he said.

About 44 per cent of Canadians are $200 a month or less away from financial insolvency, according to accounting firm MNP.

Credit agency TransUnion said earlier this month that average non-mortgage debt stood at $29,312 per person, including an average credit card balance of $4,154. But about half of Canadians pay off their credit cards each month, so the burden is actually much higher for those who don't.

Tackling debt can seem daunting, and many consumers choose to ignore the problem by paying only the monthly minimum, but an honest financial self-assessment and some planning will pay dividends in the long run, said Hannah.

The first step in taking on messy finances is to draw up a workable budget, with reasonable spending cuts, that's not too restrictive, he said.

"If your morning latte is a must-have, keep it, and look for other areas in your budget to scale back on."

Long-term planning and patience is important so that you actually stick to a plan. That includes putting money aside for expenses such as car repairs so that they can be paid with cash, rather than using a credit card and restarting the debt cycle, he said.

"It's why so many people fail with their New Year's resolution to get out of debt real fast. It doesn't work. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.