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How To Deal With Overwhelming Credit Card Debt

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Credit cards are useful tools for providing us with money in advance.  This money is not free however.  It is an advance loan and must be repaid within the credit agency timelines.  

In fact, the money you spend using a credit card payment is more expensive than your own money from your bank account unless and until you pay it back in full. Credit card companies have to make money, too, and they do this by adding interest rates which mostly affect delinquent payments.

If you’re not careful, you may find yourself juggling with expensive fees that, coupled with other debts and life circumstances, may culminate into a debt cycle.

Luckily, there are ways to pull yourself out of the cycle of credit card debt with strategies you can use to take control of your debt.

If you’re struggling with debt management, be sure to contact the team at A.C. Waring & Associates Inc. We can help set you on the right path to financial solutions.   All you have to do is call us.

Getting To Know Your Credit Card

Knowing all the ins and outs of a credit card is the first step in protecting yourself from overwhelming debt in the future.

There are several different aspects of credit cards you’ll need to know about before you get your credit card, including:

Minimum Payments

Minimum payments are the lowest amount you can pay in credit card fees for a single month. If you don’t pay your minimum, your interest rates may increase, your credit rating might decrease, and you might get reported to your credit bureau for late payments.

Your minimum payment ranges on the type of credit card you have, your limit, and the amount of debt you have on the card. In every case, though, your minimum payment will increase with the balance you owe on that card.  The real control of debt management is paying the full amount monthly and NOT the minimum payment.

Annual Percentage Rates

Annual percentage rates (APR) are the interest your credit card company charges based on your card balance.

Most standard credit cards have an APR of 19% to 20%, but you may find promotional interest rates as low as 4% or 5%. It’s important to know that these promotional rates will end after a certain amount of time and jump back up to standard rates. If you have not been making payments on your interest, your interest rate might jump even higher once your promotion ends.

Credit Limits

Every credit card has a limit, but you might still spend more money past the limit. The catch is that you’ll have to pay hefty fees on the money you use.

If you have a good standing with your lender, you’ll likely get offers to increase your limit. However, these limit increases can come with other caveats that could affect your minimum payments or APR.

Cash Advance

A cash advance is physical money you could pull from your credit card at an extra charge, sometimes even higher than your typical APR interest.

You may be charged for how much money you pull from your cash advance in fixed amounts, percentage rates, or both.

Payment Control

There are some strategies you can use to help take control of your credit debt before you let it get ahead of you.

Two of the most common strategies include snowball and avalanche payments:

  • Snowball payments prioritize paying off the smallest amount of debt first, then moving on to the next smallest amount of debt.
  • Avalanche payments focus on paying off your largest amount of debt, then moving on to the next largest.

You can also use these methods to approach debts with the highest interest rates. By ridding yourself of high-interest rate debts first.

And as always, other strategies include taking on extra employment, creating online content that creates payback, selling equipment and other material things, or creating items for sale.

No matter which method you choose, you’ll need to be paying the minimum or more, preferably, on all other types of debt. Without paying your minimums, your interest rates will rise, making it that much harder to keep on track with your payments. 

Other Simple Strategies

Both of the snowball and avalanche strategies are incredibly useful for getting you out of credit card debt, but they can be even more effective if you combine them with other methods like:

  • Budgeting
  • Creating an emergency fund
  • Finding extra work

Debt management doesn’t happen overnight, and it could take many months before you find yourself with your head above water. But creating a plan and sticking to it is by and large the most effective way to help get yourself out of credit card debt or any other debts.

What If Your Debt Is Too Out of Hand?

What happens if your accumulated debt load becomes too large to handle?

If you find yourself paying off credit cards with other credit cards or shuffling around debt payments only to find out your credit cards are maxed out or your mortgage goes unpaid it is past time to look for professional for help.

There are several ways Licensed Insolvency Trustees and credit counsellors can help you handle your debt. All you have to do is recognize you need help and reach out for it. Some of the most common ways professionals like us can help include:

Credit Counselling

Professionally-led credit counselling services review your finances with you to see if a payment plan can be created to address your debts responsibilities.

Young couple with advisor regarding how to deal with credit card debt

Debt Consolidation

Some Debt consolidation puts multiple debts into 1 lump loan, meaning that instead of paying off multiple debts from different sources, you’re now making a single payment from month to month.

At A.C. Waring & Associates we view Debt Consolidation as bringing all your applicable debts together in order to stop the cycle of payment arrears and related fear, anger and anxiety by examining your alternative options for debt relief that does not include another loan.

Bankruptcy & Consumer Proposals

Bankruptcy and Consumer Proposals are often choices about which people may be unaware but they are options available to you if you don’t have any other way of paying for your indebtedness.

Both of these options don’t necessarily discharge all types of debt, but they can help provide you with federally sanctioned ways to extinguish debt overload and deal with your creditor responsibilities through the trustee.

Written by Arthur Waring

Arthur earned his Bachelor of Arts from the University of Western Ontario before earning a Bachelor of Commerce from the University of Windsor. During university, he also participated in a French immersion program in Trois Pistol, Quebec, and has been employed for several national firms over the years.

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