In my last blog, I discussed how of paying only the minimum payment on credit card debt puts you in a merry-go-round of continual interest payments. Now let’s look a ways to avoid this nauseating ride.
Avoiding Credit Card Debt
Here are my thoughts about avoiding and dealing with credit cards:
- you only need one credit card, no one needs multiple cards
- credit cards pay for things you need, not what you want
- leave the credit card at home, only take it for planned purchases
- never use credit for cash advances, the interest starts right away
- never run a balance, the card MUST be paid off each month
- pay credit card balances in full every month to avoid interest charges
- where you have a balance, pay at least 3x the minimum payment required. Make it your purpose card to pay it off ASP.
Try to look at the bigger picture and shed the instant gratification culture in which we live. Ultimately any debt makes you vulnerable if you get sick, lose your job, divorce, or experience other life events.
It’s important to think about what you’re putting on a credit card and ask yourself if, in the long run, the purchase is worth risking your financial well being. Save up for the purchase instead.
Guide for Using Credit Cards
Where there are financial issues with credit you need to reconsider how the cards are being used.
First of all, most people only need one credit card. That should be a proper Visa or Mastercard from your bank and not a department store, gas station or otherwise.
As well as a credit card everyone should have a debit card that they use for day today purchases.
If you don’t have the money to pay for something you cannot use the card unless it falls into one of two categories:
- the purchase is for something we need, not a want
- the only way to purchase is with credit, e.g car rentals, airline tickets etc.
Most of us in today’s must have society have forgotten that in the past people “saved up” for purchases and went without. Before credit cards were introduced years ago credit debt was dramatically less.
Getting Help for Credit Debt
In a perfect world we would all implement the above strategies but do you actually know anyone who lives in a perfect world?
Well, certainly you are not alone. Canadians are at record levels of indebtedness and one in three Canadians are unable to pay their credit card balances in full each month.
Some households are simply overstretched and their credit card debt has become an unmanageable burden.
In my next blog we’ll discuss your options to stop interest and eliminate credit card debt. Stay tuned!
About the Author
Brenda Owens is a licensed insolvency trustee having graduated from the Durham College Business Administration Accounting Program, with Honours, in 1993.
In October of that year, 1993 Brenda accepted a position with James R. Yanch, and received her Insolvency Trustee License in 2007 and started working as a bankruptcy trustee.
Over the years, Brenda’s ability to listen and thoroughly explain the insolvency and bankruptcy process and Consumer Proposals has helped hundreds of families regain financial control in Oshawa and Durham Region.