Month: January 2013

How To Pay Credit Cards – Pay More Than The Minimum

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For many people – the title of this article, How to pay credit cards – pay more than the minimum goes without saying.  They simply do it automatically.  They either pay off the balance in full each month, or pay down as much of the balance as they can.  They understand that a credit card is a convenience – they use it to buy things, not to pay for them. But that’s not the case for everyone.

We hired Harris Decima to find out why so many Canadians gets caught in a credit card cycle of minimum payments and eventually find it next to impossible to eliminate credit card debt on their own.

Why Pay More Than The Minimum?

We discovered that 38% of Canadians are currently carrying a balance on their credit card, and of those people almost half always or often carry a balance. That’s proof that there is a large portion of the population that only pays the credit card minimum amount they are asked to pay – either because that’s all they think they have to pay (which is technically correct) or it is all they can afford to pay (and for some people even that can be hard to do).

Let’s deal with the first group – that pay the credit card minimum because that is all they are required to pay.  A typical bank credit card charges anywhere from 11% to 25% interest on outstanding balances – let’s call it 18% on average.  That means if you carry a balance when you use a credit card the items actually costs more than the price you paid at the cash register. For example, let’s say you bought your three kids shoes for the second half of the school year – the bill for six pairs of kids’ shoes was $220.  If you use a credit card and only pay the credit card minimum required each month that means you will actually pay $260!  For kids shoes!  That’s $40 extra you could have used in some other way…

If that doesn’t bother you, then consider this.  If you only pay the credit card minimums and you continue to use your credit cards every month then over time your credit card balances are going to grow and grow and grow…  Until at some point you may fall into the second group of people – the ones that only pay the credit card minimums because that’s all they can afford to pay. That’s why it’s important to make extra payments towards your credit card so you lower your balance and interest charges.

People that are only able to pay the credit card minimums are caught in a debt trap. The minimum payments are so large that they use up all of their available cash.  If they need to make any new purchase they have no choice but to use a credit card to pay, and it makes the problem worse. Here’s a simple example: let’s say you carry $5,000 in credit card debt at 18% interest. That means you’ll pay $900 a year, or $75 a month just in interest. 

Now take that $5,000 example and compare it to the total balance on all of your credit cards: $10,000, $15,000, $20,000 or more…  the amount of interest you are paying is crippling.  More importantly, what else could you be doing to improve your life if you had an extra $75, $150, $225, $300 or more available to spend every month?

If you are caught in the credit card debt trap it may be time to seek professional help. Take control of your debt and give us a call. We’ll give you a plan to be free from credit card debt.

I was overwhelmed with creditor calls and did not know what to do

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Milton C. (not his real name), married, 34 years old, $27,100 in debts, Newmarket, Ontario

Just over 5 years ago I was going through a very rough period in my life. The majority of my issues stemmed from my financial situation.

I became overwhelmed with creditor collection calls and did not know what to do. I thought that I would lose my house and lose my car among other things.

I met with one of your professionals and by the end of my second meeting I felt a huge weight lifted off my shoulders. From being out of control I finally felt in control of my future.

I greatly appreciate the help that I received from my initial meeting through to the completion of my consumer proposal. All of your employees were very respectful, professional and in tough times, that is what I really needed. I’m back on track and I do think your firm helped guide my path to recovery.

Best regards and thanks again.

One of the most common stress points we hear is clients telling us they are afraid that when the phone rings it will be another collection call.  The good news is that the legal protection provided by a bankruptcy or consumer proposal can stop the collection calls so you feel much less stress. The process is fairly simple:

  1. Contact us for a free debt assessment
  2. If you need to file a bankruptcy or proposal, we’ll work with you to complete the paperwork.
  3. We file the necessary documents with the government. From here forward you the benefit of bankruptcy protection from all creditor actions.
  4. We notify your creditors that you have filed a bankruptcy or consumer proposal. This will stop the collection calls.

Sometimes it takes time for your creditors to notify everyone involved that you have filed a bankruptcy or proposal, especially if they have outsourced calls to collection agencies.

That’s OK.  When you get a call all you need do is tell them you filed for bankruptcy or made a proposal to your creditors and give them our name as your trustee.  They can contact us if they don’t have the paperwork yet.  If they do continue to call, give us a call. We are happy to contact them directly on your behalf.