Credit cards are a wonderful invention. A very convenient way to spend money.
Maybe too convenient.
If you are watching this – you may have a debt problem connected to credit cards. In this short video, we will explore some of the ways you can avoid the dangers of only paying minimum payments on credit cards.
Quick question. Hands up all those who were taught how to manage a credit card? Right. Not many of us then.
So here’s an example of how only making minimum payments gets us into trouble.
You purchase $10,000 worth of new furniture on your credit card with 20% interest rate.
You make a $10 minimum payment of 3% of what you owe, plus interest.
Making these minimum payments means it will take you over 12 years to pay this off. Instead of costing $10,000, that furniture will cost you $15,000 or 50% more. The opposite of a ‘SALE’.
If you ARE only making minimum payments then it’s not just costing you a LOT of money – the debt can actually become unmanageable.
Here are some of the do’s and don’ts of managing credit card balances.
- Check your credit card balance regularly – at least once a month. You will see your spending habits and what they are adding up to each month. You may not be able to pay that bill down quickly, but you CAN stop it from getting any larger. Become aware of your spending habits. Especially the ones that are taking you deeper into debt.
- Check the box that states how long it will take to pay off your balance with minimum payments. This should be a sobering reminder to take control of your credit card purchases.
- Try an experiment. Put your cards out of reach for a month and carry enough cash to pay for things. Try to make it through the month without adding to your overall debt. If you can, wonderful. But if you can’t, you may need help with your finances. We both know that you can’t spend more than you earn for very long without some serious consequences.
- Find out how much interest specifically you are paying each month. Unsecured debt of $50,000 is very common for Canadian households. That means they are paying $400 per month in interest alone and that money is not even reducing the debt load. We both know that that is a pretty crazy thing to do.
- If you are becoming concerned about unmanageable debt, then reach out for professional advice. It doesn’t have to be this way. It IS possible to become debt-free and get a fresh start. Over a hundred thousand Canadians do it each year. And if they can, you can too.
So maybe it’s time to get some proper help and put the dangers of only paying the minimum payments on credit cards behind you?
Adamson & Associates are Licenced Insolvency Trustees – LITs for short. LITs are the only debt professionals in Canada that carry a license from the federal government. The initial consultation is free with no obligation – you have nothing to lose and perhaps everything to gain. Reach out today and get the fresh start you deserve.