Tuesday, January 24, 2023

Where To Pay Off Credit Card Debt

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Work With Your Creditors

How to Pay Off All Your Credit Card Debt FAST

Reach out to your creditors to explain your situation. A credit card issuer may be willing to negotiate payment terms or offer a hardship program, especially if youre a longtime customer with a good track record of payments.

If your issuer offers a hardship program, it may provide relief when circumstances beyond your control like unemployment or illness impact your ability to manage payments. Whether you negotiate with your issuer or accept the terms of a hardship program, either option could lead to more affordable interest rates or waived fees, depending on the issuer.

These small changes might be just enough to help you get a handle on your debt, and the worst that can happen is they say no.

Balance Transfer Credit Card

If your credit is in good shape, another option might be to apply for a balance transfer credit card. These cards typically come with a low or 0% APR for a set period of time, with some promotions offering an interest-free period of a year or longer.

During the introductory period, you pay no interest on the balance you transfer from another credit card, although you could pay a transfer fee that’s typically 3% or 5% of the amount you transfer.

If you’re able to pay off the entire balance by the end of the introductory period, you can avoid paying any interest charges. And even if you can’t completely pay it off in time, pay as much as possible every month toward the balance and you could still save yourself hundreds of dollars.

If you have multiple balances, consolidating them with a balance transfer can also simplify your monthly payments.

However, it’s important to understand the limitations of balance transfers. The promotional APR is often only for the amount you transfer, and a higher interest rate may apply to any new charges you make using that card. Some promotional offers do include both balance transfers and purchases, so review the terms carefully.

Finally, keep in mind that a late or missed payment may cause you to lose the introductory rate, and after the introductory period ends, the interest rate on the unpaid balance can jump significantly.

Consequences Of Not Making Minimum Monthly Credit Card Payments

If you stop making the payments on a credit card, there will be consequences:

  • You may lose entitlement to rewards under the credit cards rewards program
  • Your creditor will attempt to collect money from you
  • There will be a negative impact on your credit score and your credit report
  • You may experience adverse consequences from the right of set-off
  • A Licensed Insolvency Trustee can legally protect you from the consequences of unpaid credit card debt.

If you are worried about the consequences of unpaid credit card debt, your first step is to make a commitment to speak with a Licensed Insolvency Trustee to explore your debt relief options.

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Benefits Of Debt Consolidation

Debt consolidation can be a useful way to consolidate multiple lines of high-interest credit card debt under a loan with one fixed, monthly payment. You can consolidate your debts with a debt consolidation loan, a balance transfer credit card or even a home equity loan.

Debt consolidation can make it easier and less expensive to pay off your debt, but only if the interest rate of the debt consolidation loan is lower than the interest rates of your credit cards. Use Bankrates debt consolidation calculator to find out how much money you could save on interest.

Set Up Automatic Payments

How I Paid Off $7000 Of Credit Card Debt in 7 Months ...

If you can, automate your minimum monthly payment to ensure you dont miss each one, given that missing a payment can lead to late fees and increased interest. This will guarantee you wont be late on all your credit card payments as long as you have enough money in your checking account to cover your auto payments, says Thomas Creel, the founder of Creel Financial.

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Other Important Notes About Collection Agencies

  • You may be able to take action to stop calls from collection agencies and in some instances, creditors, debt buyers and law firms
  • A creditor can only assign your outstanding account to one collection agency at a time
  • Some law firms in Canada operate in virtually the same manner as a collection agency
  • If your debt remains unpaid for more than six months, a collection agency representing your creditor might be prepared to negotiate a one-time payment for less than one hundred per cent of the outstanding balance typically, the older your account the more approachable a creditor might be

Call Your Credit Card Company First

Consider this your first step toward paying off credit card debt.

Before diving into a plan for paying off your debt, a good first step is to contact your credit card company . You should make sure youre up to date on all of your balances and also ask what your options are as far as any help they can offer.

In some cases, you might be able to secure a lower interest rate, temporary payment reduction, or change in payment due date. Youre more likely to get a good result if you indicate youre looking for low-interest credit cards from other companies.

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Consider A Debt Consolidation Loan

A debt consolidation loan is a type of personal loan that can help you consolidate multiple lines of high-interest debt into a single loan. Debt consolidation loans also come with a perk: If you make the monthly payments in full and on time, your credit score could see a positive impact.

The main perk of a debt consolidation loan is that it tends to carry lower interest rates than credit cards, so if you meet the qualifications, you may be able to save money on your credit card debt.

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Coronavirus Credit Card Relief Programs

Many credit card companies are offering some form of financial relief to customers impacted by the coronavirus pandemic.

In order to take advantage of any of these relief programs, youll need to first contact your provider to formally request financial assistance. Be aware, however, that many companies are asking you to first visit their websites or use their mobile apps because theyre experiencing longer-than-normal wait times on the phone.

While itll vary based on the company, here are some of the most common forms of assistance that companies are offering:

Lowering or deferring your monthly minimum payment

Many credit card companies are offering emergency forbearance, which allows you to skip or reduce your payments for a limited period of time. Keep in mind youll need to make up any skipped or reduced payments after your forbearance period ends. When forbearance ends, you won’t be asked to make up missed payments immediately, but you will need to resume making at least your minimum monthly payments, which may have changed.

Waiving or refunding late fees

If you miss a payment, your credit card company would generally charge you a late fee. During the coronavirus pandemic, however, many companies are waiving or refunding late fees, if you request financial relief because of the pandemic.

Reducing your interest rate

Establishing a payment plan to pay off existing balances

Best Cards To Pay Off Bills And Other Debts

If youre looking for a way out from under a pile of bills and other debts, a card with an extended 0% APR period may just be the ticket. Whether were talking about student loans, medical bills, a car loan, home equity loan, or any type of personal loan a chunk of what you pay each month goes toward interest charges.

Here are some of the cards we found that can help you implement a solid debt-payoff plan:

$0 Good/Excellent

Make sure the card you choose doesnt charge deffered interest on any outstanding balance once the intro period expires.

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Keep Track Of Your Spending

Take charge of what you owe by keeping track of money coming in and going out. If you know what you’re spending, it’s easier to keep up with bills and credit card payments. You can track your spending in a few different ways.

Savannah’s smart choice

Savannah owes nearly $10,000 in total on her three credit cards. The average interest rate on the three cards is 20%. The minimum monthly repayment for the cards is about $200.

Savannah works out that if she only makes the minimum repayments each month:

  • It would take 61 years to pay off the three cards.
  • She would pay over $42,000 in interest.

Instead, she decides to pay $300 a month. This means:

  • It will take about four years to pay off the three cards.
  • She will save almost $38,000 in interest.

Consider A Balance Transfer Credit Card

5 tips to get rid of your credit card debt

If you have good to excellent credit despite your debt which is possible if youve been making your minimum monthly payments on time and kept your low you may qualify for a 0 percent APR balance transfer offer with a balance transfer credit card. This zero-interest introductory offer could last anywhere from 12 to 21 months and will let you transfer your higher-interest balances to the new card. Youll save on interest for the duration of the 0 percent period, making it easier and faster to get out of high-interest debt.

You should always pay attention to the interest rate after the promotional period is over, says Justin Zeidman, manager of credit card products at Navy Federal Credit Union. Consider how long it will take to pay off your credit card debt in comparison to the promotional period so you dont get stuck with a higher interest rate after the 0 percent interest period is over.

Who this strategy is good for: Those good at keeping track of credit card payments.

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Reduce Your Credit Limit

To avoid the temptation to overspend on your card, ask your credit provider to reduce your credit limit. You can do this online, by phone or by visiting a branch. In most cases, it takes between one and two business days.

If you need to increase your limit to buy something special, aim to pay it off quickly. Then reduce your limit again to a manageable amount.

What If I Cant Make My Credit Card Payments

Did you know that only 25% of Canadians pay off their credit card debt in full each month?

That means 75% of us carry a balance on our credit cards each month. In fact, its quite common for Canadians to carry outstanding balances each month on several credit cards, which can result in paying several thousand dollars each year in interest. Many Canadians eventually need credit card debt help.

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Am I Inheriting My Parents Debt In Canada

You cannot inherit debt. As a beneficiary, if there are more debts than assets, you wont receive an inheritance either. But, you cant inherit debt. You can only be responsible if any of the conditions I explained above exist. The one exception is that if you are a blood relative, your parent owes money to Canada Revenue Agency and you received a transfer of their property while the debt to CRA was outstanding.

Using The Avalanche Method To Pay Off Credit Card Debt

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Where the snowball method attacks the credit card with the smallest balance, the avalanche method reduces your credit card debt by attacking your credit card that has the highest annual percentage rate or interest rate.

While you use minimum payments to pay against all of your other credit cards, you use as much as you can from your available budget to pay off your high-APR credit card.

Once you have fully paid off the high-APR credit card, you use that same monthly budgeted amount in addition to the monthly minimum payment to pay off the next-highest APR card.

The avalanche method works by striking down the biggest contributor to your increasing credit card debt: interest payments. By paying off your highest APR card, you significantly reduce the amount of interest that you must regularly pay each month.

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Learn How To Use Your Credit Responsibly In The Future

After you reach your goal of paying off your credit card debt, it’s important to be proactive about developing good credit habits to avoid ending up in the same situation again.

This includes:

  • Sticking to your budget to avoid overspending.
  • Paying off your balance on time and in full every month.
  • Avoiding racking up a high balance.
  • Taking advantage of credit card rewards and benefits to add more value to your everyday spending.

It’s also a good idea to check your credit score regularly to know where you stand at all times. This can also help you spot potential issues that could hurt your credit, so you can address them quickly. In addition to your credit score, make sure you also frequently review your credit reports, which give you a deeper understanding of what’s affecting your credit score.

How Using A Personal Loan To Pay Off Credit Card Debt Works

Personal loans are a type of unsecured loan that a borrower can take out for almost any purpose, including paying off credit card debt. Loan amounts can vary by lender and will be paid to the borrower in one lump sum after the loan is approved. The borrower then pays back the loan with interest in monthly installments that are set by the loan terms.

Many unsecured personal loans come with a fixed interest rate that wont fluctuate or change over the life of the loan. An applicants interest rate will be determined by a set of factors, including their financial history, credit score, income, and other debt, among other factors. Typically, the higher an applicants credit score the better their interest rate will be, as they may be seen as a less risky borrower. Lenders may offer individuals with low credit scores a higher interest rate, presuming they will be more likely to default on their loans.

When using a personal loan to pay off credit card debt, the loan proceeds are used to pay off the cards outstanding balances, consolidating the debts into one loan. Ideally, the new loan will have a much lower interest rate than the credit cards. Consider that the average credit card interest rate is about 16% , while the average personal loan rate is about 9.5% , according to the Federal Reserve. By consolidating credit card debt into a personal loan, a borrowers monthly payments can be more manageable and cost considerably less interest.

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Choose A Debt Repayment Strategy

Once Nelson developed her spending plan, she needed to figure out the best way to use the additional payments.

I used the avalanche method, she says. I decided to pay off the credit card with the highest interest rate, which happened to be the credit card with the lowest balance.

The avalanche method is a common debt payoff strategy because it helps you save money by eliminating higher-interest debt first. You put all your extra payments toward the account with the highest APR, or interest rate, while making minimum payments on all the others. Once the card with the highest APR is paid off, you move onto the following highest-interest account. The cycle continues until youre debt free.

A common alternative is the snowball method, in which you instead make higher payments on the account with the lowest balance while paying the minimum on your other accounts. Then, youd roll those payments over toward the next lowest balance, and so on. You may end up paying a bit more in interest over time, but this strategy has the psychological benefit of eliminating certain balances more quickly.

Although Nelson didnt use a balance transfer credit card to pay down her debt, it can be another useful tool for paying down high interest debt. A balance transfer card lets you move your debt from one card to another, and pay down your principal balance without accruing interest over an introductory 0% APR period.

Not Understanding Terms Of The Account Agreement

How to Pay Off Credit Card Debt: 8 Smart Steps

Banks and credit cards supply the terms and conditions of specific cards at the time the application is completed and when the card is issued. It’s important to know what these terms and conditions are before you use the card. Doing so will help you have a better handle on what’s expected of you from the credit card issuer, and it will also help you manage your spending habits better.

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