Credit Card Debt Help Guide

Credit Card debt can be challenging to repay. This type of debt, if left unmanaged, can damage your financial fitness. We’ll look at strategies to help you clear your credit card debt once and for all. By learning how to use these strategies as soon as possible, you’ll be on your way to boosting your financial health. Before we discuss these methods, we’ll examine some interesting facts about credit card debt, the causes of credit card debt and how credit cards function.

We hope reading this will help you understand why credit card debt is so challenging and what you can do to get out of it. If you have questions or need help finding the best way to become debt-free, call (844)-402-3073 to speak with a trained credit counsellor.

Interesting facts about credit card debt

Made in Canada reports

  • In 2022, around 90% of Canadians 18 years old and above owned a credit card.
  • The number of credit cards in circulation in 2022 reached 94.8 million.
  • Canada experiences $800 million in credit card fraud every year.
  • In Canada, credit cards are used to pay for 56% of goods and services.

Credit card basics

How do credit cards work?

When it comes to credit cards there are four things to keep in mind at all times; your credit limit, your interest rate, your payment due date, and your minimum payment amount.

Every card you own has a limited amount of money you can borrow. When you apply for a credit card, the issuer will review your credit history and income. They use this information to decide your credit limit (the most amount of money you can borrow at one time.) It’s recommended not to borrow more than 30% of your credit limit at any one time.

As a borrower, you must pay an interest rate. This is the cost of borrowing money from credit card companies. The interest rates on credit cards are charged monthly. The lower your interest rate the less the cost of borrowing.

So much of having healthy finances relies on one thing – paying bills on time. This one thing can cut down the cost of borrowing money drastically. These lower costs have a direct impact on your budget.

How your minimum payment is calculated will be outlined in your credit card agreement. Often, it’s calculated as a percentage amount of how much is borrowed during that billing period. Typically, there is also a dollar amount the minimum payment amount cannot fall below. This means that if the minimum percentage amount falls below the minimum dollar amount you will be required to pay the dollar amount. There’s one very important thing to be aware of when it comes to minimum payments. While paying the minimum payment will keep you from getting collections calls it will not help you get out of debt. More on that later.

Why get a credit card?

Credit cards are useful for several reasons. For example, you can get cash back or collect points. These points can help you save money at your favourite stores or earn rewards for travelling and vacationing.

While not necessarily the best use for credit cards, it’s undeniable that they can be very useful when it comes to dealing with a financial emergency. Many people often use them to cover surprise costs like fixing their homes or car repairs.

Credit cards are also a key determining factor of an important component of everyone’s finances, their credit score. While building and maintaining a good credit score is possible without a credit card, having and using one responsibly goes a long way.

Though credit cards are beneficial, they have some financial impacts that you should know about. Using credit cards comes at a cost. If not managed well, a high one. Learning about these costs and how to manage them well is crucial to good financial health.

What are the different types of credit cards?

Numerous credit cards exist that provide an onslaught of rewards and benefits. Understanding what options are available will help ensure you choose the right one for you and your family.

Here is a list of some credit card options:

Rewards credit cards

Credit cards that allow you to collect reward points are an excellent option. These points can save you money on purchases like film tickets, groceries, and oil changes. However, these cards tend to have a high interest rate. Make sure the benefit of getting reward points outweighs the cost.

Cash-back credit cards

When you use a cash-back credit card for a purchase, you receive a portion of the amount spent as cash in return. This can be a great way to earn some extra money while making everyday purchases. Enjoy the full benefit of cash-back by ensuring you pay off your card in full each month.

Student credit cards

Student credit cards are for young adults in college or university. They usually have little to no credit history. Student cards help them build a good credit rating. These cards are easier to acquire than other credit cards on this list. However, if a student doesn’t handle their finances properly, they can end up with large credit card fees every month. This can lead to more debt.

Secured Credit Cards

Most credit cards are unsecured loans. However, a secured credit card requires a cash deposit before you can use it. This type of card is ideal for people who want to closely monitor their spending habits. A secured credit card helps build or rebuild credit history. If you use it wisely, you’ll be able to show lenders you handle debt responsibly. This can increase your likelihood of qualifying for improved financial rewards.

Tips for getting the right credit cards for your needs

  • Most Canadians don’t need to have dozens of credit cards in their wallet. In fact, having several increases the likelihood that you will face challenges with debt. Following the tips below will help you choose the right card for you.
  • Only get new credit cards when you have a clear need and the means to manage the debt.
  • Review your budget carefully before you apply for a new card to make sure you can afford the monthly payments.
  • Always try to maximize your score before you apply for a new credit card.
  • If you have balances on your current cards, try to pay them off before you apply.
  • Only get a balance transfer credit card if you can afford to pay off the consolidated balance in full during the 0% APR period when you first open the card.

Managing credit card debt well

While managing credit card debt is not rocket science it’s not something we’re born knowing how to do either. Most people find that with just a little knowledge they can manage their credit cards so they are a benefit to their finances rather than a stressor.

Why is credit card debt so difficult to manage?

Credit cards are a “revolving” type of credit. A credit card company extends you a credit line that you can borrow against as needed. Each month, you must make a minimum required payment equal to a small percentage of the current balance you owe.

This creates the first challenge with credit card debt, that the payments can be unpredictable. The more you charge, the more you must pay each month. For most people, credit card debt is easy to manage when the balances are low. When the balances get high, the bills begin to eat away at your income, leaving you less money to save and cover emergencies. You end up in a cycle where you live paycheque-to-paycheque and every emergency expense goes on a credit card.
Credit cards also have high-interest rates compared to other forms of credit. Those high rates mean that a large percentage of each payment you make gets used to cover accrued monthly interest charges. At an average interest rate of 19.99 percent, more than half of every minimum payment you make covers interest.

The result is that it takes a long time to pay a balance down with minimum payments. When a credit card balance is high, it can take years or even decades to pay the balance off. Even if you pay more than the minimum, it can be difficult to get ahead.

Managing credit card bills effectively

  • Always aim to pay off your balances in full every month – never charge more than you can afford to repay.
  • If you pay a credit card balance off in full before the grace period ends, interest charges never apply to the balance. You can check your credit card agreement to find the grace period.
  • Credit card minimum payments should never use up more than ten percent of your net income (the income you take home). If you start to use more, you need to stop charging and focus on debt repayment.
  • Check-in with your credit card companies periodically to see if you qualify to reduce the interest rate applied to your balance. Even if they are not willing to reduce your rate permanently, there may be a promotional rate that you can enjoy for a set time.
  • Always read your credit card statements carefully. They may contain information about your interest rates and changes to your rates or credit limit.
  • Don’t use credit cards as a substitute for income. If you can’t cover daily expenses with cash, you need to revisit your budget and make some decisions on how to balance your expenses with your income.
  • Never be satisfied with just making the minimum payments on your credit cards. Always try to pay more to eliminate balances as quickly as possible.
  • Only use rewards credit cards for balances you can pay off in full within the first billing cycle. Otherwise, interest charges will quickly offset the rewards that you earn.
  • Build an emergency fund. Setting aside a fund for when unexpected expenses or periods of financial hardship happen is your greatest defence against credit card debt. Not having to rely on outside sources means saving on interest costs and having flexibility built into your financial rebuilding plan.
  • Hide your credit card. It’s much easier to avoid using your credit card when it’s harder to use. Put your card somewhere you’ll only search for it if you really need to buy something and clear your card information off your computer.

How to know if you have too much credit card debt?

There are a few ways to evaluate credit card debt to make sure it’s in line with your income and budget. First, check to see how much income it takes to cover your total minimum payment requirements for your credit cards. This total should never exceed 10 percent of your income.

Another way to evaluate your debt load is to check your debt-to-income ratio. This measures your total monthly debt payments versus your total monthly income. This is the same ratio that lenders check when you apply for new credit to make sure you can afford the debt.

Another way to see if you have too much debt is to check your credit utilization ratio. You never want to use more than 30 percent of your total available credit limit. You also want to keep balances below the 30 percent mark for each credit card account that you have.

In general, you want to keep your debt-to-income (DTI) ratio below 36 percent. This gives you ample income to cover your debt payment and other expenses. It also allows you to comfortably borrow money. You are less likely to face rejected credit applications because you have too much debt.

To find out your DTI ratio easily, you can use our DTI Calculator.

Understanding credit card debt and its impact

Credit cards have major benefits, but they can also do some damage. Having too much credit card debt can be a problem. If you don’t handle it well, it might prevent you from buying a home. It could also make it harder for you to get a job. Some organizations check your credit history when you apply for a job. In those cases, having a low credit score could reduce your chances of getting hired.

We’ll look into how credit card debt can affect you financially and how it may influence your mental well-being. We’ll also examine the power of your credit score. This information will help you understand what it really means, the true cost, of credit card debt.

The financial impact

Unless you pay your bills in full every month, when you use a credit card the things you buy cost more by way of interest. Credit cards make it incredibly easy to just swipe and say I’ll deal with it later. The thing is, interest adds up quickly. People end up paying a lot more for things. Much more than they would if they knew the final cost with interest added. Plus, the added cost of high interest rates makes it harder to achieve financial goals like saving for your retirement, buying a car, or saving up for a vacation.

The mental impact

Credit card debt can hurt your mental health.

Statistics Canada found that 48% of Canadians have lost sleep because of financial difficulties. Not sleeping can lead to many mental health issues.

Another survey conducted by Newswire in 2022 found that financial stress affected many Canadians. It revealed that 35% of them experienced mental health issues including anxiety, depression, and other conditions related to financial stress.

The credit score impact

Credit cards often play a significant role in determining your credit score. So using credit cards properly can help you achieve and maintain a high score. When you have challenges with credit cards, your score will often reflect it. A low credit score can stop you from buying a home or renting an apartment. It can even stop you from pursuing certain careers.

If you can’t eliminate debt on your own, then you can expect your credit to take a hit as you get out of debt. Any debt solution that repays what you owe on an adjusted schedule will result in at least some credit damage. Solutions that don’t repay everything you owe will damage your credit more.

The more drastic a solution, the worse you can expect the credit damage to be. However, these types of solutions can give you the clean break that you need from debt. Then once your debt is gone, you can begin rebuilding.

Remember, nothing in credit lasts forever. Even the credit score damage caused by bankruptcy and debt settlement will drop off your credit report in six years. What’s more, even before the penalties expire, you can begin rebuilding your credit.

Primary causes of credit card debt

Credit cards come with many unexpected costs that add to credit card debt quickly. For example, various fees, minimum payments and high-interest rates all add to your debt. It’s important to carefully consider these potential costs before relying too heavily on your credit card for everyday expenses.

Only paying the minimum payment

Many people choose to only pay the minimum monthly amount on their credit card balance. This allows them to prioritize other expenses. However, by doing this, they add a lot of years and a lot of cost to becoming debt-free. Here’s an example to show just how much time and money.

Overall scenario

Imagine that you have a credit card balance of $1,000. Your credit card has a 20% APR and a minimum payment schedule (the percentage used to calculate your minimum payment amount) of 3%.

Minimum payment

If you just make the minimum payments, it would take you 10 years and 9 months to finish paying off that $1,000. In the end, with all the interest charges you will have paid out $1,990.60. That’s almost double your original amount!

Just $5 more

By paying even just $5 a month over your minimum payment you pay off the debt in 6 years and 6 months. When all is said and done you will have paid out $1,610.99 in principle and interest. That’s 4 years and 5 months of time savings and $379.61 in cost savings!

Rounding up to $100

Let’s say you round up your payments to be $100, so $30 to take care of your minimum payment and another $70 to really tackle your original balance. Doing this, everything would be paid off in just 1 year and you’d only pay out a total of $1,103.04. Compared to paying the minimum only, that’s a total time savings of 9 years and 11 months and cost savings of $887.55!

Annual Percentage Rate

The Annual Percentage Rate (APR), otherwise known as the interest rate, is the primary factor that affects the total cost of credit card debt. Typically, credit card APRs are higher compared to other types of loans, like mortgages or car loans. A higher APR means it’s more expensive to carry debt on a credit card. These high costs make it difficult to pay off the debt which means being in debt longer. Being in debt longer, in turn, means taking on more debt.

Credit limit goes up

If your credit limit has risen, hesitate from celebrating. When your credit limit increases, there is a temptation to spend more. This could result in purchasing unnecessary or unwanted items. If you keep using your credit card whenever you’re tempted, you’ll stay trapped in a never-ending cycle of debt. Ultimately, this can negatively impact your financial stability.

Late fees

Paying late fees is an awful part of credit card debt. Not paying your credit card bills on time can lead to large fines. The more payments you miss, the larger your credit late fees become. This just puts you further and further into debt. If you miss a payment for the first time, call the credit card company. Explain why you were late. They may forgive your first-time offence.

Annual fees

Some credit card issuers charge clients annual fees for the continued use of their credit cards. While typically minimal, they do reduce your available credit and add to what you owe.

Fees for transferring balances

Transferring balances on credit cards can add to your debt because of fees. People often transfer balances to get lower interest rates. However, they end up stuck paying many fees and extra charges. Before you transfer a balance, it’s important to understand the financial impact.

Cash advance fees

A fast cash advance is a short-term loan that provides quick access to funds. It can be used for unexpected expenses, emergencies, or to cover temporary cash flow gaps. Beware! Cash advances come with hefty fees. Also, unlike regular purchases, cash advances start accruing interest right away. All these costs make cash advances a very expensive option making it easy for costs to get out of hand.

Strategies for Paying off Credit Card Debt

Don’t lose hope if you’re struggling with debt. Many strategies exist that can help you get your finances back on track. Some strategies might work for you, based on your current debt level. However, some could worsen your already difficult situation. Choose carefully. We will explore multiple debt relief options.

Terrible Debt Relief Strategies

Many debt relief plans promise quick solutions. However, these strategies may make it harder for you to get out of debt.

Below is a list of these unfavourable debt relief strategies.

Don’t dip into your RRSP

It can take many years to build a solid Registered Retirement Savings Plan (RRSP). You have properly set up this savings account to help you retire with ease.

If you decide to use your RRSP funds to clear your credit card debt, this could harm your financial health. Withdrawing money from your RRSP means losing out on valuable interest-building time. You’ll also be stuck with paying high penalties for withdrawing money early.

Borrowing money from loved ones

Borrowing money from friends or family to pay off debt can cause complicated feelings. Sometimes these feelings can lead to ruining lifelong relationships. Really ask yourself if your relationship can withstand any storm that may come its way. If you borrow from a loved one, do yourself and them a favour by outlining all the details of your repayment plan upfront.

Getting a Payday Loan

Payday loans are small amounts of money borrowed to be repaid with the debt owner’s next paycheck.

You might believe getting a loan from a payday loan company is a smart choice. However, this may not be true. Payday loan organizations have the highest interest rates. Sometimes as much as 500%. This is why using a payday loan to escape debt often backfires and leads to a perpetual cycle of paying back loans.

Life insurance funds

Don’t take money from your life insurance policy without carefully considering the consequences. Withdrawing funds might seem like a simple fix to money problems. However, it can greatly lower the amount your loved ones will get when you pass away. This can leave them in a tight spot financially. Instead, explore other avenues for generating income or seek advice from a financial professional to find alternative solutions.

Taking on more debt

If you’re having trouble with your existing debt, you might think about getting a new credit card or any other form of debt. The practicality and convenience of this idea may be tempting, but it’s guaranteed to just make matters worse.

Good do-it-yourself debt relief strategies

Excellent debt management plans are uncomplicated. Some wonderful debt relief options can help you get out of debt and feel less overwhelmed about it.

Here are some great do-it-yourself debt relief strategies:

Create a Budget

Starting a budget is one of the best ways to get out of debt. Simply allocating where your money is to go and knowing where it’s going can lead to making huge strides in getting out of debt. There are plenty of budgeting tools and software available. With these applications. If you prefer not to share your financial details with digital apps, consider purchasing a monthly budgeting journal as an alternative way to budget.

Get a second source of income

Having a second part-time job is a great way to get out of debt. Allocate all the money you earn from your job to pay off your debt and you’ll be debt-free in no time.

Use physical money

Before purchasing anything, consider using physical cash instead of your credit card. Using your credit card for everything might seem simple. However, if you spend with cash, you’ll see exactly how much you’re spending. This visual cue will help you stick to your budget.

Check your emotions

Sometimes the reason that people are in debt is the reaction they have to negative emotions like anxiety. People with anxiety sometimes spend money impulsively. This is because spending releases dopamine, a brain chemical. Dopamine makes them feel good when they spend their money.

If you experience anxiety or negative emotions, try keeping track of your spending habits. Also, before making impulsive purchases, ask yourself if you truly want the item or if it’s a necessity. Even better, seek the help of a financial therapist. They are licensed professionals who can help you deal with your emotions to help change your spending habits.

Use the debt Snowball Method

The snowball method is a debt relief strategy. It is simple to implement. All you need to do is pay off your credit card debts from smallest to largest balance.

For example, let’s say that you have 3 credit cards. The first card has a balance of $25, the second card has $200, and the third card has $500. Using the snowball method, you would pay the minimum on the $200 and $500 cards. All other funds would go towards paying off the $25 balance. Once that card is paid off any extra funds would go towards paying off the $200 balance and so on until all the cards are paid off.

Use the Avalanche method

The avalanche method is a strategy for paying off debt. You begin by writing all your debts from the ones with the highest interest rates to the smallest interest rates. After you have done that, you will make the minimum payments on all your debts. You can then use any extra money that you have to pay the balance of the debts with the highest interest rates. Once the highest-interest debt has been paid off, you will use the money you were paying on it for the next debt on the list. Keep doing this until all debts are paid.

Negotiate debt settlement with your creditors

If you struggle to pay your debts, talk to your creditors. You can come up with a plan with them that is good for both them and you. For example, If you are experiencing financial hardship, they might let you pay them less during some months. Additionally, they can stop your payments temporarily.

Good debt relief strategies with some help

Debt management plan

If you cannot get out of debt on your own effectively, then your next step should be to get credit counselling. A trained credit counsellor will evaluate your debts, credit, and budget to help you identify the best debt solution for your needs.
If you can afford to pay back everything you owe but you’ll need some support, the credit counsellor can help you enroll in a debt management plan. This is a professionally supported debt repayment plan administered by the credit counselling organization. They work with you to find a monthly payment that you can afford. Then they work with your creditors to reduce or eliminate the interest charges applied to your balances.
You make one monthly payment to the credit counselling service that they distribute to your creditors every month as agreed.

Advantages Disadvantages
You pay back everything you owe in 36-60 payments.You need professional help to set up a debt management plan.
It reduces your total credit card payments by up to 30-50 percent.You can’t use your credit cards once they are enrolled in the program.
Your interest rates are reduced or, in most cases, eliminated.The plan will be reported on your credit for two years after you complete the program.
You can qualify regardless of how low your credit score is or how much you owe.

Consumer proposal

If you have a lot of debt and can’t pay it off, think about talking to a Licensed Insolvency Trustee. They can help you file for a consumer proposal.

A proposal is an agreement that your trustee makes on your behalf to your creditors to drastically reduce how much you owe. Sometimes by as much as 80%. If your creditors agree to this arrangement, all the debts covered under your proposal are put into one monthly payment.

Proposals are excellent debt relief options. This is partly because debtors can usually keep most of their assets. However, what assets they can keep varies from province to province.

Although consumer proposals are a good debt relief strategy, they also have their pros and cons.

Advantages Disadvantages
Protection from creditors: When you file a consumer proposal, an automatic stop called a ‘stay of proceedings’ happens. It protects you from creditors taking any legal action.Credit score: A consumer proposal will hurt your credit score. Your credit report will show this information for three years from the date you complete it.
Single monthly payment: In a consumer proposal, you pay your debts by making one payment each month. This payment is then shared among all your creditors. This simplifies the repayment process and makes it easier to budget.Acceptance: Majority creditors are under no obligation to accept the proposal.
Amount owed: You end up paying out far less than is originally owed to the creditor.Fees: There is a fee added to your proposal fo the cost of working with your trustee
Credit score: A consumer proposal has less of a negative impact on one’s credit score than bankruptcy.

Debt consolidation

Debt consolidation is a solution where you roll multiple debts into one monthly payment at the lowest interest rate possible. This involves getting new credit to pay off your existing credit. Several financial products allow you to do this:

  1. Balance transfer credit cards
  2. Personal loans
  3. Personal lines of credit (LOCs)
  4. Home Equity Line of Credit (HELOC)

With each of these products, you borrow money at a low-interest rate. Then you use the funds to pay off your existing high-interest rate debts. This leaves only the low-interest credit line or loan to pay off.

Advantages Disadvantages
Debt consolidation loans can help to simplify your finances by combining multiple debts into one monthly payment.When you get a consolidation loan, you may need to provide something of value as collateral. This could be the equity in your home. If you cannot make the loan payments, your assets could be at risk.
By using these loans with lower interest rates, you can save money. You’ll spend less on interest payments.Debt consolidation loans might make your debt repayment period longer. This depends on the specific terms and conditions of the loan.
You can get out of debt faster, even though your monthly payments may be lower.Some lenders might have high fees for processing a loan, known as origination fees. They could also penalize you for paying off your loan a bit early. These costs can cancel out any savings you might get from combining your debts into one loan.
These loans can offer borrowers an opportunity to boost their credit scores. This happens when they make their payments on time, regularly.If you get a debt consolidation loan but don’t fix the underlying financial problems, you might end up with even more debt.
You need good credit and the right debt-to-income ratio to qualify.
If the interest rate is not sufficiently low, you won’t benefit.

Bankruptcy

Bankruptcy is a legally binding solution for those who owe so much that they cannot pay back even a portion of what they owe. In other words, they are insolvent. Bankruptcy starts by meeting with a Licensed Insolvency Trustee, who will evaluate your liabilities (debts), assets, income, and expenses. If they determine you are insolvent then they will recommend bankruptcy. Once the bankruptcy claim papers are approved and filed by an LIT, the person in debt gets most of their debts forgiven.
With bankruptcy, any assets you have that do not qualify for exemption must be surrendered to the Licensed Insolvency Trustee. What is exempted varies from province to province. Afterward, those assets are sold, and the proceeds get distributed to your creditors to pay back a portion of what you owe. Then the remaining balances are discharged.

Bankruptcy can be an emotionally charged debt relief solution. Some people feel overwhelmed at the thought of having to sell assets to settle their debts. Others, as unwarranted as it is, feel a sense of shame around the idea of having to go through bankruptcy. Being such an emotional time in someone’s life, it can be easy to focus on the cons of filing for bankruptcy but there are many benefits to it as well. Below is a list of the pros and cons of this debt relief solution.

Advantages Disadvantages
Bankruptcy provides a fresh start for people or businesses overwhelmed with debt.When you file for bankruptcy, your credit score will drop significantly.
It stops collection efforts, such as creditor harassment, lawsuits, and wage garnishments.Bankruptcy may require the liquidation of assets, resulting in loss of valuables.
It can help people or businesses restructure their finances and develop a new financial plan.It can be emotionally stressful and, though unwarranted, can cause feelings of failure or shame.
Bankruptcy allows the opportunity to prioritize debt repayment and potentially negotiate with creditors.The bankruptcy filing will become part of a permanent public record. It will stay on your credit report for up to 7 years for a first filing and 14 years for a second.
You can be debt-free in as few as nine months if it is your first time filing.

Credit card debt FAQ

Here is a helpful guide with answers to the most common questions we receive about credit card debt. If you don’t see the question you have or you would like more information, please call us at (844)-402-3073.

No. Some people think that you need to have a credit card and carry a balance from month to month to maintain a good score. Not so.
With credit utilization, a lower credit card balance is always better for your score. Thus, paying off balances in full every month means you maintain a low utilization ratio. It’s the best thing you can do for your score.

What’s more, you can have a good credit score even if you have no credit cards. If you choose to stay away from these high-interest rate debts, you can still use installment loans and other revolving credit lines successfully. If you do, then you can have a high score even if you don’t have a single credit card.

This depends on you, your budget, and your financial management style. You should only have as many credit cards as you can afford to manage effectively and repay.
For most people, two or three credit cards is a good number to have. You can have one low-interest rate card for large purchases and emergencies. Then you have one or two reward credit cards that you use for specific purchases. Charges on these cards should be paid off in full every month.

There are a few ways to evaluate credit card debt to make sure it’s in line with your income and budget. First, check to see how much income it takes to cover your total minimum payment requirements for your credit cards. This total should never exceed 10 percent of your income.

Another way to evaluate your debt load is to check your debt-to-income ratio. This measures your total monthly debt payments versus your total monthly income. This is the same ratio that lenders check when you apply for new credit to make sure you can afford the debt.

In general, you want to keep your debt-to-income ratio below 36 percent. This gives you ample income to cover your debt payment and other expenses. It also allows you to comfortably borrow money. You are less likely to face rejected credit applications because you have too much debt

The final way to see if you have too much debt is to check your credit utilization ratio. You never want to use more than 30 percent of your total available credit limit. You also want to keep balances below the 30 percent mark for each credit card account that you have.

Many retailers offer credit cards that have specific rewards programs for shopping in their stores. These cards offer a few advantages. You can get rewards for making purchases at that retailer using their card. These cards are also often easier to get approved for, so you can get a credit card even if you have a low credit score or no credit history.

However, those benefits are balanced out by higher interest rates and stricter terms for the account. In many cases, high rates and restrictive terms aren’t worth the rewards that you earn in-store. This is especially true if you don’t pay the balance off in full every month.

Be very careful when considering a store credit card. Read the terms of the credit card agreement carefully before you sign up. Make sure you understand the fees, how interest charges apply and what rates you will pay, and terms that may limit how beneficial the card is, such as deferred interest.

It can be difficult to qualify for general-purpose credit cards and reward credit cards if you have a poor credit score or no credit history because you are new to using credit in Canada.

In this case, you may want to consider a secured credit card. This is a card that you open with a small cash deposit. You can qualify even with bad credit or no credit because the deposit covers the lender if you don’t make your payments.

A secured credit card can be a good way to build credit, so you can improve your score and work up to getting traditional credit cards.

If you do not make the minimum required payment by the billing due date, the credit card company will apply late fees to your account.

If the payment is not made within 30 days, it is considered missed. The credit card company may report the missed payment to the credit bureaus, which can negatively impact your credit score. You will continue to get missed payments on your credit report until you catch up by repaying all the payments you missed.

If you miss the payment by more than 60 days, the credit card company may also apply penalty interest. This is a higher interest rate than the rate you normally pay for purchases. This penalty rate means it will be much harder to pay off your balance and accrued interest charges will mount quickly.

After about six to nine months of nonpayment, the creditor will charge off your account. This means they effectively consider the account a loss because you have not paid. The account will be frozen, so you will not be able to make any new charges.

The account may also be sold to a third-party debt collector. Also, the creditor or the collector that purchases the charged-off account has a right to sue you. If they win, the judgment may result in wage garnishment or property liens.

Credit card debt is rarely forgiven. However, to help you get out of debt, there are certain things that you can do.

  • Limit the use of your credit cards.
  • Create a budgeting journal to keep track of your expenses so that you can put money into your debts to become debt-free in the time that you choose.
  • Speak to a financial counsellor to come up with some debt relief strategies.

Credit card can be very serious. Damaged credit from not paying your credit card bills on time can make it difficult to find a job or a place to live. Not all is lost though. If you’re in serious credit card debt, it’s possible to become debt-free. Steps like budgeting, creating financial goals, and watching your bank accounts will surely help you.

One of the reasons college students should have credit cards is because it builds their credit history. Having a credit history can go a long way when it comes time for them to move out on their own or buy a car. Student credit cards can also be useful when it comes to financial emergencies, and learning to manage money responsibly.

The Canadian government has made laws to help protect debt owners from collection agencies that want to collect on credit card debt. These laws were put in place to protect the rights of Canadians.

Here is a list of these laws taken from the Government of Canada website:

  • Debt collectors must send you a letter or try hard to contact you before collecting money.
  • Debt collectors can’t harass you. There are strict dates and times they are allowed to contact you.
  • In Canada, financial institutions cannot charge debt owners an interest rate of more than 60%. The only exceptions are Payday loan organizations. If you suspect your rights have been violated, visit the Financial Consumer Agency of Canada. It is an organization dedicated to protecting the rights of Canadian consumers.

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