So Whats The End Game
If youre NOT going to pay it off using the 5 steps I listed above, once you stop paying your debt, you need to wait until its in collections.
Debt collectors have purchased your debt for pennies on the dollar, and they will do whatever they can to get you to pay.
There are laws based on the Fair Debt Collection Practices Act.
They protect you from being harassed. And there is also a statute of limitations in each state which determines how long a debt collector has to sue you to collect the debt.
You can wait it out. And
After seven years, the debt will fall off your credit report. You can also save up and negotiate with these debt collectors to settle your debt for less than you owe.
If you do, make sure they agree in writing to remove it from your credit report.
And think twice before using credit cards you cant afford to pay off each and every month.
Stop giving your bank and creditors free money each month in interest.
Change your mindset.
And understand the process. Understand credit. And learn how credit card companies make money off you being in debt.
That way you can stop paying credit card debt and stop worrying about it.
What Is A Good Interest Rate For A Credit Card
Credit card interest rates vary widely, which is one reason to shop around if you’re looking for a new card. Typically, the better your credit, as represented by your , the better the rate you’ll be eligible to receive. That’s because the credit card company will consider you to be less of a risk than someone with a lower score.
In shopping for a credit card, knowing your credit score and the range into which it falls can help you determine which cards and what kinds of interest rates you might be eligible for before you apply. You can obtain your credit score for free at a number of websites and also from some credit card companies. Note that your , which you can also obtain free of charge at AnnualCreditReport.com, do not include your credit score.
You May Be Spending More With Your Credit Card
How easy is it to spend money these days?
Its super easy! You just hand someone a piece of plastic and boom, you bought something.
Theres no magic hologram that pops up showing your pile of money shrinking.
In fact, you may not even realize how much you spent until the bill comes in the mail a month later.
Because spending money has become so easy, you could actually be spending MORE with a credit card vs. if you would have just used your debit card or cash.
Studies have shown that some people would spend between 10-15% MORE just because they were using a credit card.
Remember when McDonalds started accepting credit cards?
Almost immediately, they saw their average transaction jump from $4.50 to almost $7. All because of credit cards.
Thats some crazy stuff!
So if you dont think about your budget and your goals every time you make a transaction, it could be costing you. Another reason to stop using credit cards.
Also Check: Td Bank Gift Card Activate
Transfer Your Balance To A 0% Apr Credit Card
One of the easiest ways to stop incurring credit card interest is to transfer your balance from your current card to one with a 0% introductory APR. You wont be charged interest on the transferred balance for a set period of time, usually 12 to 18 months. If you pay off the card before the 0% rate expires, you wont owe any interest on the amount you transferred.
However, you should aim to use a 0% card only if you can pay off the balance before the introductory rate ends. Some cards apply retroactive interest to your initial balance if its not fully paid off when the 0% period ends.
Its easy to get caught up in the balance-transfer game transferring your balance from one 0% card to another, making only the minimum monthly payment, then repeating the process when the 0% period ends.
But play the game too often, and youll end up losing, for two reasons: the possibility of retroactive interest and how applying for credit cards in a short period of time affects your credit score. Hard inquiries to your credit like those from applying for new cards can hurt your score, especially if your credit history is short. Get one 0% APR card and make a plan to pay it off before the introductory rate expires.
Why Should You Avoid Paying Interest
Its a good idea to try and avoid paying interest when possible because youre essentially losing extra money whenever you use your credit card for purchases.
However, in order for banks to profit from this transaction, they charge interest on those payments, which means everything we buy is technically more expensive than if we bought it with cash.
In addition, some people use their credit cards as a source of money that they withdraw from, much like a regular bank account. However, its best to avoid cash advances because there could be additional fees associated with it.
In most cases, a cash advance is around 5% of the amount withdrawn each time you get some cash this way. In short, you should avoid cash advances and watch out for high interest rates on credit cards to save some money.
You May Like: How To Get Cash From Credit Card Capital One
What Counts As A Cash Advance
A cash advance will be charged whenever you make a cash withdrawal or transfer using your credit card account.
- Transfers made to other BNZ credit card accounts and credit card accounts with other banks or financial institutions, except for balance transfers.
- ATM, electronic and over the counter cash withdrawals or transfers.
- All payments to people that havent arranged to accept credit card account payments through BNZ Phone and Internet Banking Services. There are some registered companies which are an exception to this.
Paying Off Your ‘closing Balance’
The best way to avoid credit card interest is to pay off your closingbalance before your statementâs due date, or if you have a balance transfer, the interest free days payment shown on your statement. Credit cards come with “up-to-44 days” or “up-to-55 days” interest-free on purchases. Interest to pay doesnât build up until after the statement due date.
If you think youâre likely to forget to make manual payments, why not set up a direct debit in internet banking or the NAB app to pay it in full each month? If youâd still prefer to pay it manually, you can set up a payment reminder as a prompt. Find out more about NAB Alerts.
Also Check: Capital One Credit Card Auto Rental Insurance
How Interest Charges Are Applied To Your Credit Card
Interest is the money youll pay if you dont pay your credit card balance in full by the due date. Youll continue to pay interest until you pay your balance back in full.
Interest rates vary depending on your financial institution and the type of transaction. For example, you may pay 19% interest on regular purchases and 22% on cash advances or cash-like transactions. Rates for specialized and retail credit cards may be higher.
Your credit card statement and your credit card agreement must clearly indicate the interest rates you must pay.
Cut Expenses And Increase Income
Once you have a strategy for reducing or eliminating interest, you can focus on putting more money toward your debt on a monthly basis. There are two ways to do this: Make more money or spend less. If you can, do both. If thats not possible, work on whichever method makes the most sense for you.
To cut expenses, evaluate your current budget. Do you have any monthly expenses you dont need or value? Are there more affordable alternatives for some of your existing expenses? Challenge yourself to cut $100 from your budget the first month. Then try to beat your previous months savings each subsequent month.
You can also try to make more money. If your employer pays by the hour, ask whether you can work overtime. If not, can you pick up a second job at night and on the weekends? You could also use a skill such as writing, carpentry, tutoring or design to earn money as a freelancer.
Other moneymaking options include selling homemade goods online or at your local farmers market or craft fair, or selling items youre no longer using. Maybe you have an extra room in your home that you can rent out on an accommodations website. As with cutting expenses, challenge yourself to make an extra $100 this month, and try to earn more next month.
Read Also: Should You Pay Off Credit Cards In Full
Can A Collection Agency Sue Me On Behalf Of A Creditor
Suing debtors is not a common activity for collection agencies. Researchers have estimated that collection agencies across Canada sue only about one in 10,000 accounts assigned to them for collection.
The fact that collection agencies do not often sue people does not prevent them from threatening to sue debtors. It is very common for collection agencies, collectors employed by collection agencies, and lawyers working on behalf of collection agencies, to threaten legal action when in fact they have no intention of proceeding.
Work Out What You Can Afford To Pay
You should usually try to pay at least the minimum payment if you can. If you dont, the company will charge a fee and your credit rating might get worse.
You should still pay essential household bills like rent, and any priority debts you have – even if it means you cant afford the minimum card payment. It’s more important to stay in your home or avoid court action. You can ask your nearest Citizens Advice to help you work out how to pay off your credit card.
Try to pay the same amount each month – its easier to plan how much money you’ll have left for other things. You’ll also pay off the debt sooner than if you just pay the minimum payment. This is because the minimum payment is a percentage of the debt thats left on the card – so the minimum payment gets smaller as you pay off the debt.
If you can’t afford the same amount each month, try to pay a bit more than the minimum if you can. This means youll clear the debt sooner and pay less interest overall.
James owes £3,000 on a credit card that charges 19% interest. Hes not spending any more on the card.
Jamess minimum payment is 2.5% of the total debt. This starts at £75 for the first month and reduces as he pays off more of the debt.
If James pays £75 each month rather than letting the minimum payments reduce, hed pay off the debt in 5 years and 1 month. Hed pay £1,539 interest.
You May Like: Do Cabelas Points Expire
How To Pay Off Your Credit Card: 8 Ways To Reduce Interest Charges
Reading up on credit cards? Wondering whatâs the best card for me? In under 60 seconds, CardFinder narrows down your top matches without impacting your credit score, no SIN required
If youâre grappling with credit card debt, youâre not alone. And there are steps you can take to lower your credit card payments and reduce your interest rates .
Below we cover eight ways to reduce your credit card interest charges.
Use The Island Approach
your ongoing purchases from your revolving debt will ensure that interest rates apply to the lowest possible amount. Given that you should be able to pay for everyday expenses like gas and groceries in full every month, isolating such expenses on one credit card will prevent the average daily balance on your card designated for debt from being unnecessarily high. This, in turn, will lower your overall interest charges.
Read Also: What Is Vioc On My Credit Card
How Interest Is Calculated
Interest is always charged from the date of each transaction when you dont pay your current balance in full each month. This will be applied to transactions making up the current balance, and any new transactions, until the closing date of your next statement, taking into account any payments made to your credit card account. Therefore, if you pay your current balance in full in one month, but dont the next, youll be charged interest from the date of each transaction or fee on your current statement.
Heres an example:
Sarah sometimes pays off her credit card balance in full, and sometimes just makes the minimum payment required it depends on how her finances are looking that month.
She paid the balance shown on her 31 March credit card statement in full, so her opening balance on her next statement at 1 April is $0. On 9 April, she books a trip to Fiji for $700, and her closing balance at 30 April is $700. She plans to pay this balance in several payments over the next few months. Sarah will be charged interest from 9 April, the date she purchased her trip.
Dont Talk To Me About Your Airline Miles Or Double Cash Back
I hear this one a lot:
I only use my credit card for airline miles/cash back/points. Because I pay it off every month, Im actually MAKING money!
In order for this to be true, youd have to stick to your budget every single month. If you overspend on the card like I mentioned in the previous section, you could actually be LOSING money.
For example, if youre using a 2% cash back credit card but overspend by 10% per transaction on average, youre losing 8% every time. Thats not a good deal at all.
OK. Now that Im done cutting up my credit card from Citi, lets break this down a little.
The girl in the video has a dilemma. She REALLY wants to go to the Katy Perry concert but it seems that her friends parents are financially responsible and dont want to buy them tickets.
So what does the girl do? She asks her financially irresponsible father to buy them ALL tickets. You go girl!
Just when you expect the father to go off on some life lesson about saving to meet goals , he offers to buy them all tickets.
He even reminds her not to forget her sister! You know why? He gets 2x the points on his credit card! YES!
If I counted correctly, that would be about 9 tickets if you include dad and his friend.
Im not sure what the going rate for a concert ticket is these days, but Im guessing someone as popular as Katy Perry can fetch at least $60. Therefore, dad can expect to pay at least $540 for everyone.
Hes going to get 1,080 points! Thats a huge number!
You bet they are.
Don’t Miss: Chase Close Credit Card Account
Fastest Way To Pay Off Credit Card Debt Just Pay It
1: Figure out how much you owe and the interest rate you are being charged on each credit card
2: Order your credit card debt from the highest interest rate to the lowest
3: Commit to paying off the credit card with the highest interest rate first
4: Reduce your bills and expenses elsewhere and use the money to pay extra towards your credit card debt
5: Find a way to make more money and pay it off even faster
Can You Be Sued By Your Creditor
If you owe monies to your creditor and have stopped making payments as agreed, there is a chance that your creditor will sue you. However, launching a law suit isnt free your creditor will incur significant professional and administrative expenses. It is possible for a creditor to sue a debtor and not to recover a penny from them. Your creditor will be much more inclined to sue you if they are confident the odds are high that they will actually recover monies from you.
1. When might your creditor be inclined to sue you?
Your creditor might sue you under the following three conditions:
- The dollar amount owing is significant enough
- The relevant limitation period on the debt has not expired
- You own real property in your own name
Most large creditors in Canada will not sue regarding outstanding accounts of less than $4,000. This threshold for suing could be significantly higher depending upon the creditor.
Creditors are not likely to sue consumers if the relevant limitation period, or statute of limitations has expired such a suit would not likely succeed.
2. When might your creditor not be inclined to sue you?
To learn more about the likelihood of being sued, read the article, Nine Reasons Why Your Creditor Might Never Sue You.
3. What will a creditor do when it intends to sue you?
In event that a creditor wants to sue an account, it might do one of the following:
Don’t Miss: Td Bank Gift Card Fee
What Is A Good Interest Rate On A Credit Card
The you’ll qualify for depends on your credit score, the type of card you’re interested in and overall market conditions.
One way to gauge whether a card’s interest rate is “good” is to compare it to the average. As of November 2019, the average interest rate on credit card accounts that charge cardholders interest was 16.88%. When negotiating a lower rate on your current cards, aim for a rate that’s lower than the average.
Keep in mind, too, that rewards credit cards will likely charge higher rates than cards that don’t offer airline miles or cash back. Similarly, credit cards aimed at those with fair or poor credit and retail credit cards often have higher rates.