If you’re juggling credit card payments and living from paycheque to
paycheque to make payments, try to pin down what you’ve been using your
credit cards for. Have you made several large one-time purchases, for
example, appliance or furniture or home renovations or some sort of
emergency? Or do you use credit cards on a whim or impulse for fashions,
cosmetics, dining out, entertainment, even a daily latté or two? If your
credit card crunch is the result of the latter, you’re engaging in bad
borrowing behavior and you need to make some drastic changes.
Paying off large credit card balances that you’ve carelessly run up might
at first seem an insurmountable task. But after you’ve put the brakes on
your bad borrowing habits, and freed up some extra funds for the month,
there are a few tactics you can use to start chipping away at the debt
1. Make the minimum payment.
Start paying the minimum monthly payment on each card. Add an additional
amount beyond the minimum to at least one card with the highest interest
2. The zero-interest balance transfer promo.
Consider transferring a high card balance to one of the zero-interest
transfer promotions that start appearing in your mailbox at this time of
the year. You could get breathing room of as much as six months to a year
with no interest. (There’s usually a nominal fee on the balance transfer of
up to 3% of the principal.) Any payments you make would go directly against
your principal amount. But if you go this route, be sure to check terms and
conditions after the interest-free period expires.
3. Switch rates…for a fee.
Talk to your credit card company (often your bank) to see whether you are
eligible for a premium card. You’ll pay an annual fee, but the interest
rate charged on these cards can be less than half that charged on no-fee
cards. If you have large outstanding balances, what you spend on the annual
fee (anywhere from $99 to $150 per year) will be offset by savings on
compounded interest payments.
4. Line of credit.
This is a tricky one. If you already have a personal line of credit, and if
you haven’t maxed it out too, you might consider paying down some of your
credit card balance using your line of credit. Interest rates are
considerably lower on lines of credit, so you’d be reducing the overall
interest rate hit. On the other hand, if it’s a secured home-equity line of
credit, you in effect have a second mortgage on your home. If you don’t pay
that as stipulated, the bank can seize your home. Use personal lines of
5. Loan consolidation.
Another tactic is to speak to your bank about a loan consolidation. In
other words, you’ll be taking out a personal loan at a lower interest rate
to pay off other higher-interest credit-card loans. Your bank’s loan
officer can work out a payment schedule to fit your budget. But you’ll have
to make a promise to yourself to lock away all but one (preferably
low-interest) credit card until that personal loan is paid off.
And don’t use “point collection” as an excuse or rationale to avoid getting
out of the credit card crunch. Loyalty points are worth far, far less than
the high interest credit companies charge on credit cards. Credit card
companies know this, and trade on it. For example, Visa Inc., the world’s
largest credit card company, reported net earnings of US$9.94 billion in
fiscal 2018. Lending is lucrative; borrowing is not. Don’t play the game!
If you’re a points addict, use non-credit-card-affiliated programs only
until you’ve dug yourself out of the hole.
And finally, if you are receiving past-due notices, dunning letters, or
calls from collection agencies, you could be in over your head. In this
case, you need to consult your banker or other financial or legal
professional for some practical loan payment advice and some serious
Watch Robyn discussing the $1 million retirement on CTV’s “Your
Robyn Thompson, CFP, CIM, FCSI, is the founder of
Castlemark Wealth Management, a boutique financial advisory firm specializing in wealth management
for high net worth individuals and families. Contact her directly by
phone at 416-828-7159, or by email at
for a confidential planning consultation.
Notes and Disclaimer
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The foregoing is for general information purposes only and is the opinion
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