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What is the Best Way to Get Credit Card Debt Relief in Ontario?

What is the Best Way to Get Credit Card Debt Relief in Ontario?

Credit cards offer many of us a simple and easy way to make purchases online and in person. In fact, ninety-five percent of adult Canadians have at least one credit card.

Ideally, you want to pay your credit card in full every month to avoid interest charges. But small purchases can add up, or you might have gone through a period of financial hardship, making it hard to meet your expenses. This can easily lead to credit card debt. 

 If you are struggling to make your credit card payments on time each month, it is essential to understand your options for getting relief. With a little bit of research and discipline, you can be free of credit card debt and get yourself to financial freedom.

Understanding the costs of credit card debt

While a simple solution for purchases, credit cards come with notoriously high-interest rates. Credit card interest rates are typically around 20%. The higher the interest rate, the faster the debt will accumulate.

It can take months or even years to pay off your debt if you only make minimum payments. Once you start becoming late on payments, it is easy to get caught in a cycle of credit card debt.

Missed or late payments can affect your credit score, making it more challenging to get other types of loans and affecting your overall financial life.

Once you are stuck in a cycle of credit card debt, it can be challenging to get out of it. However, a few strategies can help you eliminate your credit card debt.

7 Ways to get rid of credit card debt

7 Ways to get rid of credit card debt

Pay more than the minimum balance.

Your credit card’s minimum balance is typically either $10 or 3% of the outstanding balance, whichever is higher. 

When you only pay your minimum balance, it will take you a long to pay down your entire debt balance, especially at an interest rate of around 20%. And if you continue to spend on your credit card, your debt can accumulate faster than you can pay it.

You will have to pay more than your minimum balance to quickly eliminate your credit card debt. 

Strategically pay down multiple credit cards.

When you have outstanding balances on multiple credit cards, it can be overwhelming to try and prioritize the debt. There are several debt payoff strategies, such as the debt avalanche or debt snowball methods, to help you focus on your goal of paying down your credit card.

If you need help staying accountable, a trusted advisor such as a credit counsellor can help you create a plan and provide you with the support you need to stick to your plan.

Balance Transfer to a new credit card.

Often, credit cards provide new customers with offers such as low-interest rates when you transfer balances to a new card from your current credit card.

These offers are usually for a limited period, three to six months, but can be a potential short-term solution if you can stay disciplined. A lower interest rate can make it easier for you to pay down debt, as more of your money will go to the loan rather than the cost of interest. If you choose this option, it is vital to focus on paying down your credit card debt and not accumulate new credit card debt.

Negotiate a lower interest rate with your credit card company.

You can try to call your credit card company to see if you can negotiate a lower interest rate. 

If they agree to a lower interest rate, you will be able to reduce the interest costs on your credit card debt and then be able to dedicate more money towards paying down your outstanding balances.

Get a debt consolidation loan.

Most credit cards in Canada have an interest rate between 19% and 22%. 

If you can get a new loan with a lower interest rate to pay off your outstanding balance, you can consolidate your debt into one loan.

With a debt consolidation loan, you will only have one monthly payment, and it will be easier to stay on top of paying down your debt. A lower interest rate also means using more of your money to pay off the outstanding balances rather than interest payments.

Settle your credit card debt with a consumer proposal.

One option to consider to get rid of credit card debt is to file a consumer proposal. 

Once you file for a consumer proposal, you agree to pay your creditors the debt you owe, usually within three to five years.

One benefit of a consumer proposal is that it can eliminate up to 80% of your debt, and you get to keep your assets. It will also stop further legal action by your creditors.

File for bankruptcy, if necessary.

Bankruptcy, for most people, is the last resort option. It is a formal legal proceeding that can affect the assets you own and the income you make. However, if you have credit card debt and other types of debt, it can be the reset you need to start your financial life again.

What is the Best Way to Get Credit Card Debt Relief in Ontario?

All the strategies above can work depending on your financial situation. Working with professional advisors such as credit counsellors can be a great option to keep you focused as you eliminate credit card debt. They can help you decide the best strategy to get rid of your debt in a way that works for your needs.

Everyone has a unique financial situation. The best option for some will be to file a consumer proposal, especially if you have more than just credit card debt. For others, debt consolidation is a great solution to reduce interest costs. 

Next Steps

Best Way to Get Credit Card Debt Relief

If you are overwhelmed with credit card debt, you don’t have to do it alone. Our team of credit counsellors can provide support and expertise along the way to help you get credit card debt relief. Contact us for a free consultation.

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