If you are getting into credit card debt, you know how hard it can handle it. With the high-interest rates, late payment fees, ATM fees, the debt can really add up.
The good news is that there are several ways to eliminate credit card debt in Canada. Here are 10 steps you can take towards getting your credit card balance to zero.
Getting your credit card balance to zero
1). Pay off high-interest rate debt first
The first thing you will want to do is tackle credit cards with the highest interest rates.
Some credit cards have interest rates as high as 29.99%. Therefore, if you carry a balance of $2,000, you could be charged as much as $595 a year just to service the debt. Pay off your high-interest rate cards first, and you will be in better shape to handle your other credit cards.
2). Set up automatic payments to your credit card
A great way to pay down your credit cards is to set up automatic payments. This will allow you to cut into your credit card debt each month.
Setting up automatic payments will force you to budget to make sure that your checking account has the money to cover the monthly payments. Your bank should have a way for you to set up automatic payments to your credit card account.
3). Transfer balance to a lower-interest credit card
Here’s a fast way to lower your interest rate: Transfer the balance from your high-interest rate credit cards to a lower interest rate credit card. Some credit cards may offer a 0% introductory rate.
You can use that opportunity to pay down your credit card debt without dealing with high-interest rates. Now, these 0% introductory rate cards may charge you a balance transfer fee, so be sure to check out the details of the credit card contract.
4). Pay more than the minimum payment due
If you only pay the minimum payment on your credit card, then you will barely be able to pay down the principal on your card. Therefore, you will want to aim to pay more than the minimum. Try to pay at least double the minimum. That will allow you to eat into the principal of your debt and get it paid off faster.
Another approach to paying more than your minimum payment is to increase how much you pay each month gradually. For instance, you can pay 25% more than the minimum one month and then pay 50% more than the minimum the next month. Increase the amount that you can pay so you can eliminate the debt faster.
5). Avoid late fees
Late fees can be a killer when it comes to credit card debt. Therefore, you will want to make sure that you can avoid late fees as often as possible. You can easily avoid late fees by automatically paying your bill at least five to ten days before it is due.
Be sure to check your credit card statement to see when your bill is due. Sometimes, the payment due date will change. Therefore, you want to make sure that you give your automatic payment ample time to be processed by the credit card company.
6). Set up a long term plan
One of the best ways to maintain a budget or reach a financial goal is to plan and budget. When you budget, you take a look at all aspects of your finances. That includes your income, your expenses, and your debt.
Be sure to look at how much you owe on your credit cards and calculate how long it will take to pay off your debt. This will give you a better roadmap to reach your debt-free goals.
7). Limit credit card use
If you don’t use your credit card often, you will be less likely to build up a bid debt.
First, your credit card should be used if you already have money in your checking account. Why pay for something and get charged interest when you already have the cash in your bank. Try to use your credit card as a “last resort” when you don’t have cash in the bank and you have an important purchase to make, such as gas and food.
Proper credit card spending can help you easily control your debt.
8). Negotiate a lower-interest rate
It doesn’t hurt to call your credit card company and negotiate a lower interest rate on your card.
When calling customer service, be sure to mention how long you have been a customer and your on-time payment history. If the credit card company does not lower your interest rate, you can threaten to close your account. That may allow you to get a lower interest rate that can help you better service your debt.
9). Consider a personal loan
Another way to pay your credit card debt fast is to consider a personal loan.
A personal loan is a loan where you can do anything that you want with the money. Be sure to check if the interest rate for the personal loan is lower than the credit card’s interest rate. If you can get a 5% lower interest rate on the personal loan versus the credit card, it may be worth getting the personal loan.
10). Consider a debt consolidation loan
You can also consider a debt consolidation loan.
A debt consultation loan is a loan where a lender pays off all your debts, and then you pay the debt consolidation loan. Sometimes a debt consolidation loan will allow you to pay a lower interest rate.
You may want to consider a debt consolidation loan if you have debt with several high-interest rate credit cards.
Keeping credit card debt under control
Don’t let your life get dominated by credit card debt.
You can get that debt under control by following one of the above-mentioned steps. With the right planning, you can create a plan that will let you be free of credit card debt.