5 best tips to pay off holiday credit card bills – The Province
To get a better handle on your debts, start with a budget. Strategies to pay off cards work better and financial goals will be within reach.
Q: We got our first credit card bill of the year and it was a bit of a shocker. Our Christmas and holiday spending was a lot more than we realized! Now we’re worried because the other bills will be pretty big too. We realize that we definitely got a bit carried away, trying to take advantage of deals for things we don’t normally buy. It was a hard year for us and we didn’t want to disappoint the kids. But hindsight being 20/20, we’ve set ourselves up for a tight start to the year. We both work and should be OK, but what are some of the best ways we can deal with these bills? ~Morgan
A: Credit cards are convenient and tempting and make up a significant portion of the non-mortgage debt Canadians owe. According to Equifax Canada, in quarter three of 2022 (July – September), the average amount of non-mortgage debt Canadians were carrying was $21,183. When we add in the extra spent throughout the whole winter holiday season, it can add up to quite the hangover come January.
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To help you tackle your credit card bills, here are tips to make paying them down easier. Debt and money management is about more than just the numbers, so choose tips that help you keep your money safe from yourself:
Nothing says that you have to wait until your due date to make your payments. Rather than working down to the due date deadline, work up to it with smaller payments when you have the money. Not only will that keep you from spending the money inadvertently, but paying as much as you can as soon as you can helps decrease how much interest you pay in the long run.
It is very hard to pay credit cards off while you’re still using them. Put all of them away in safekeeping. Remove the account numbers from apps and online accounts. Clear payment information from your web browsers. Login and remove saved payment details from accounts with your favourite retailers. Make it as inconvenient and cumbersome as possible to use your cards, so that you’ll be less tempted to make unplanned purchases.
If you’re worried about how you’ll survive without using your credit cards, it’s even more important that you put them safely out of reach, at least for a few weeks. Rely on your budget and use cash to get a good idea about where your money is really going. Use a tracker to record your spending and identify habits that are costing you more than you think they are. If after a few weeks you still feel like you need to carry a credit card with you, choose to carry the one that you can do the least damage with. At first, this might be the one with the least available credit. Once you’ve brought down what you owe, it might be the card with the lowest limit.
Minimum payments meet your contractual obligations as a cardholder; they don’t get you out of debt any time soon. Scroll to the end of your monthly credit card statement for the required disclosure about how long it will take to pay off your balance owing if you only make minimum payments. If you’ve never looked at that before it can be an eye-opening experience!
Paying down your bills is a combination of not incurring more debt while paying more than the minimum amount due. The best strategy is to set a fixed monthly amount that is based on your budget. Use this Canadian credit card payment comparison calculator to see the difference between fixed and minimum payments. If you don’t trust yourself to stick to a fixed payment amount, turn your credit card debt into a paydown loan. Cancel the credit cards and reapply once they’re paid off.
You’ve likely heard the quote attributed to Albert Einstein, “If you want different results, do not do the same things.” If you’ve been struggling for a while to pay off your credit card debts, don’t keep doing what you’ve been doing. It hasn’t worked, so it’s time to try a different approach if you want different results.
Start by making different choices. Set a few simple goals and align your spending to achieve them. Organize your money management system and use preplanned debits to make payments or calendar reminders to make your payments manually. If you have many debts spread out across many accounts, explore credit card debt consolidation options, or if a consolidation loan is a good fit for you. Prioritize your credit cards, either according to interest rate or balance owing, and choose a payment strategy that works for you. Avoid paralyzing yourself with the snowball versus avalanche debate. Get started and adjust if you need to.
Whether you’re worried about what the neighbours will say when they see a for sale sign on your recreational vehicle, what your extended family will think if you opt out of an annual holiday, or how your credit rating will be impacted by whatever choices you make — do what works best for you and your family. The alternatives are likely worse.
You can always buy another vehicle or plan a less expensive vacation. Your credit score will recover once your debts are under control. If you need to make a drastic decision, it can sometimes be a wise financial strategy to make the tougher choices within a short period of time. If you’re not sure how this might work, seek the guidance of a non-profit credit counsellor in your area so that you’ve got all of the information you need to make an informed decision.
The first and best tip you need — but likely don’t want — is that you must outline a realistic household budget that accounts for all of your expenses, debt payments, and savings obligations. Without a budget it will be nearly impossible to get on top of your credit card bills once and for all. When skipping over this one tip that underlies every other tip, you leave yourself short and fall back into the trap of relying on credit to make ends meet. Save yourself the frustration of ignoring the best, first tip and give budgeting a try. You might end up wondering how you ever lived without it!
Scott Hannah is president of the Credit Counselling Society, a non-profit organization. For more information about managing your money or debt, contact Scott by email, check nomoredebts.org or call 1-888-527-8999.
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