Tips For Getting The Right Credit Cards For Your Needs
- Most Canadians dont need to have dozens of credit cards in their wallet. Of course, having several increases the likelihood that you will face challenges with debt.
- As such, you must only get new credit cards when you have a clear need and the means to manage the debt.
- Review your budget carefully before you apply for a new card to make sure you can afford the monthly payments.
- Always try to maximize your score before you apply for a new credit card.
- If you have balances on your current cards, try to pay them off before you apply.
- Only get a balance transfer credit card if you can afford to pay off the consolidated balance in full during the 0% APR period when you first open the card.
Get A Lower Interest Rate
Lowering your interest rate is one way to ensure more of your dollars are used to pay down your balance owing, not interest payments.
One way to get a lower interest rate on your credit card: call your lender and ask for one. If youre having trouble paying down your credit card debt, sometimes being upfront with your lender has the best results. Call your lender and explain your situation, and they may give you a temporary reduction in your interest rate.
However, if youre seeking a rock bottom rate, check out our low-interest credit cards in Canada. Its the next best option to a balance transfer credit card, with regular interest rates on new purchases ranging between 8.49% to 13.99%. While its higher than what you would pay with a 0% promotional balance transfer credit card, this rate is the regular rate and it beats the 18% or higher interest charged by other credit cards. There are even low-interest credit cards with no annual fees or modest ones, ranging from $29 to $39.
Quit The Comparison Game
You know who wins at the comparison game? No. One. Stop trying to keep up with the Joneses! Remember, youre living like no one else now so that later you can live and give like no one else. In 20 years, you wont have a financial worry in the world while everyone else will still have car loans, mortgages and credit card bills.
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Determine How Youll Respond
When you receive paperwork pertaining to a lawsuit, its important to pay close attention to the details. You may only have 30 days or less to respond to the summons. Ignore a lawsuit and fail to show up in court and you guarantee that youll lose by default.
Instead of pretending like the lawsuit isnt happening, your best bet is to review your options and choose the one that makes you feel most comfortable. Here are a few potential responses to consider.
Settle the Debt
You or your attorney can attempt to settle the defaulted credit card debt before the trial date arrives. Depending on how much you owe, this option may or may not be affordable. But if you do have the financial means to pay, settling the debt might save you a significant sum of cash, not to mention the headache of a trial.
Should you opt to negotiate a settlement, Tayne recommends being careful what you agree to and sign. You dont want to accidentally forfeit any rights or agree to judgments. And you never want to agree to a settlement arrangement that you cant afford.
Be prepared when speaking to creditors if you plan to do it on your own, and know that you have the right to go speak with an attorney, says Tayne.
Talk to a Credit Counselor
There may be another potential way to settle your defaulted credit card debt before the trial date arrives. A certified might be able to help you set up a debt management plan to pay off your credit card debt with a series of monthly payments.
Go to Court
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Are There Options Besides Bankruptcy
Yes, but theyre definitely not free.
One route is debt settlement. You hire a lawyer or debt-settlement company to negotiate with creditors in an effort to pay less than what you owe, presumably considerably less. You make one lump-sum payment and are done with it.
That sounds good, but there are serious drawbacks.
For openers, some companies wont even consider debt settlement and there is no law forcing any company to settle your debt.
If they will negotiate, youre still going to pay part of your debt. The advertisers say you may only have to pay pennies on the dollar, but better you should count on quarter on the dollar. Like three of them, as in pay 75% of what you owe.
On top of that, the debt settlement company will charge you 15% to 25% of the amount saved. And the government will tax that as income on your next tax return.
The process could take as long as three years. Your credit score is destroyed.
But at least youre not dead.
Another option is a debt management plan. A nonprofit company consolidates your bills and negotiates lower interest rates with creditors. You make one monthly payment that is lower than the combined payments you were making.
Its a better option than debt settlement, but the debt management company also charges a fee, the process takes three to five years and you pay your credit card bill in full.
That brings us back to bankruptcy.
Use Savingsthis Will Help You Pay Down Debt Faster
Many people regularly contribute to a savings plan, which is great, but this money could help you pay down what you owe faster.
Once you have an emergency fund and are saving for irregular expenses, consider stopping extra payments to savings accounts until youve paid off what you owe. This is especially helpful for those who arent saving for something specific like vehicle repairs.
The money you save by paying down your debts faster will be much higher than any interest youll earn in a savings account. Also consider using income tax refunds, job raises, or other cash boosts to accelerate this process.
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Orderly Payment Of Debt Program
Consolidated Payment at 5% Interest
If youre a resident of Alberta or Nova Scotia, you may qualify to enter into a consolidation order known as an Orderly Payment of Debt program . Other provinces used to offer this program, but have stopped offering them because non-profits have been doing such a good job at helping consumers through their credit counselling and debt management programs.
Through an OPD program, you pay back the full amount that you owe on your unsecured debts typically over a period of 3 years. The interest rate is set at 5% and you are able to keep your assets. Your creditors must agree to your OPD program and the courts must approve it.
To find out if OPD is a good solution for you, contact the agency that administers your provinces OPD program.
Come Up With A Payment Plan To Get Out Of Credit Card Debt
Mapping out your plan to get out of credit card debt is useful for a couple of reasons: You can strategize to pay off whichever debt carries the highest interest rate first because doing so will ultimately save you money. Having your plan in place can also keep you motivated because you know the direction where youre heading. And lastly, a plan will give you your debt-free datethe day youll be out of debt.
Once you take a step back and see the big-picture plan with the debt-free date, you can decide if you’re ready to tackle it or if an additional tool may help you. If you feel you’d benefit from additional structure, consider a simple debt-management tool to help you map out your plan. My favorite tool for making a debt plan is Unbury.me, which is free, online, and easy to use.
If you use Unbury.me, you’ll input your debt details so the database can calculate how long it will take you to pay off your debt based on the payment youre currently making. You can use the sliding lever at the bottom of the payment-plan section to see how changing the amount of your payment can change your debt-free date, and how your debt-free date can change the amount of interest youll ultimately pay.
The tool will also give you a payment plan based on whether or not you want to pay back the highest-interest debt first or lowest-balance debt first. .
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Getting Out Of Debt With The Debt Snowball
Start with Baby Step 1: Save $1,000 for your starter emergency fund. And once youve stored that away in a savings account, dont touch it. This money is for emergencies only!
Heres how it works:
- List your debts from smallest to largestregardless of interest rate.
- Attack the smallest debt with a vengeance while making minimum payments on the rest of your debts.
- Once you pay off the smallest debt, take that payment and apply it to your next-smallest debt.
- Repeat this method as you plow your way through debt.
Baby Step 2 takes some folks a few months to finish and it takes a few years for others. If youre on this step and laser-focused on paying off that last debt, its possible it could become . . . a grind. Maybe youre exhausted and feel like its going to take forever to become debt-free. Dont lose hopeyou can do this!
Heres 27 tips that will motivate you to get out of debt even faster. Finish line, here we come!
Get A Written Copy Of Your Agreement
If you choose to move forward with a financial relief option, its important to understand the terms of the agreement before agreeing to anything. Once youve accepted a relief option, make sure to get a copy of the agreement in writing.
During the relief period, you want to make sure to look at your statement each month for any errors or inaccuracies, and if you see anything, make sure to refer back to the agreement so you can dispute it.
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What Are Other Credit Card Repayment Methodsand Do They Work
Look, paying off debt is never easy. And theres a lot of buzz surrounding the idea of quick ways to get rid of your debt. Heres the truth: Theres no quick fix. Those tips we just mentioned are the tried-and-true route.
But we dont want to leave you in the dark. Lets take a look at the most-advertised ways to reduce debtand talk about why theyre so crappy.
- Debt Consolidation. This is basically a loan that combines most of your debts into one single payment. This sounds like a good idea until you realize the life-span of your debt grows, which means youre in debt longer. And the low interest rate that sounded so good at first usually goes up over time.
- Debt Settlement. Debt settlement companies will charge you a fee and promise to negotiate with your creditors or reduce what you owe. But typically, they just take your money and leave you drowning in the debt you already hadplus all the new late fees from when no one was paying on your balance.
- 401 Loan. Never borrow from your 401 to pay off your debt. We repeatnever borrow from your 401! Not only will you get hit with penalties, fees and taxes on your withdrawal, but youre also stealing from your own future.
These debt reduction strategies are risky and really only treat the symptoms. You dont need to consolidate, settle or borrow more money to deal with your credit card debt. You do need to change how you manage your money .
I Have $15000 In Credit Card Debt What Should I Do
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If youre carrying serious credit card debt like $15,000 or more you’re not alone. The average household with revolving credit card debt that is, debt that they carry from one month to the next had of revolving balances in 2019. That’s just the average. It’s not at all uncommon for households to be swimming in more that twice as much credit card debt.
But just because a $15,000 balance isn’t rare doesn’t mean it’s a good thing. Credit card debt is seriously expensive. Most credit cards charge between 15% and 29% interest, so paying down that debt should be a priority.
However, dealing with a five-digit credit card debt can feel overwhelming. Coming up with that kind of cash is daunting, but there are steps you can take to manage a heavy debt load:
If youre used to relying on your credit card to make your day-to-day purchases, cutting yourself off from charging might be really tough at first. But to get out of a hole, youre going to have to stop digging.
About the author:Lindsay Konsko is a former staff writer covering credit cards and consumer credit for NerdWallet.Read more
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Ask Your Credit Card Issuer For Help
Depending on your situation, you may be able to negotiate with your credit card issuer. You won’t be able to talk down your balance, but you could possibly work out a more favorable interest rate or have your late fees waived. This isn’t necessarily a slam dunk, but a 2014 study found that 90% of cardholders polled were able to get their late fees forgiven, while 63% said they were able to get their interest rates reduced, just by picking up the phone and explaining their situation. It never hurts to ask.
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Create More Than One Income Sources
You can use your talent to create more income or you can even do a side hustle to make it easier to pay off your credit card debt in Canada. Lets take a look at some of these options.
Proofreader: You can make a good income by correcting grammar and making write-ups better.
Blogging: There is no cap on blogging income. If you have a unique blog with a target audience that you can leverage, creating a 5-6 figure business is easy.
Be an online teacher: If you have some extra time, this is also a good option to make money.
Additionally, you can create up to $100 by doing simple online surveys on the following applications:
- Pinecone Research: They will pay you $3 to $5 for every survey that you take.
- Swagbucks: When you sign-up you get $5 as a bonus.
- Daily rewards: Get a $5 sign-up bonus.
- LifePoints: You get 10 free points and collect more as you take surveys.
You can leverage this windfall of promotion, raises, bonuses, or cash gifts to pay your debts.
What Is The Average Credit Card Debt In Canada
While many Canadians have no debt, those that do have more than ever. According to a report released by Equifax, the average credit card debt in Canada is on the rise, with non-mortgage debt up 3.2% in the past year. The number of Canadians struggling to handle their debt loads has also gone up. About 1.12% of Canadians are past due, or delinquent, with their debt an increase of 3.5% over the past year.
Equifax data shows the average Canadian has $23,496 in non-mortgage debt. Debt loads peak from ages 46 and 55, topping out at an average of $35,527. Heres a breakdown of the average non-mortgage debt by age in Canada:
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