What to do when your credit cards are depleted?

Using credit cards is a daily practice for many of us. Through online purchases, it has never been easier to spend money. That is why we have seen a significant increase in high credit card balances in recent years.

Being able to buy whatever you want and pay later is an exciting and rewarding experience. Unfortunately, it is also very easy to fall into the trap of spending money without being able to repay it.

You may reach the limit on your credit card and feel tempted to apply for a new one to access more credit. It is easy to forget that the interest rate will be very high if you make cash advances. Without a credit counsellor, you could find yourself in financial chaos and you exhaust your credit cards.

Getting out of debt in Canada requires preparation, dedication, and sacrifices, but it is possible to do so. Discover the steps to go from credit card problems to living debt free.

Stop using it

If your credit card is at its maximum capacity, do not request an increase in the credit limit. Instead, immediately stop using the card. This also implies refraining from employing it both online or in physical stores.

Delete all history of credit card information online and on different applications to avoid unnecessary consumption. Cancel monthly subscriptions and unnecessary monthly payment to avoid further debt. Refrain from carrying your credit card while going out and instead leave it at home.

To ensure that you do not use your card is to contact your financial institution and ask them to block it. This way, it will be impossible to make purchases with the card, even if you want to.

A new budget

Making the minimum payment is not enough if you want to pay down your debts. In principle, you need to pay the maximum every month to significantly reduce your credit card balance.

The amount you can afford to pay on your maxed-out credit card depends on your monthly income and expenses. By consulting your budget, you’ll discover where you can reduce your expenses. This can help you free up funds to reduce your credit card balance and make debt payments.

If you don’t currently have a budget yet, we highly advise you to promptly establish one. Creating a budget will help you gain a better understanding of your spending. It will also help you have a reliable spending plan for the month.

Credit card balance transfer

Another effective way to pay off your expenses is to use a credit card balance transfer. You can transfer your credit card balance to obtain a much lower interest rate. Sometimes even offering 0% rates for a certain period of time. This method avoids the accumulation of interest charges and allows you to finally pay off the balance.

You need to apply for a certain type of credit card to access balance transfers. However, you need a good credit score in order to get approved for it. If you’ve been having financial problems for a while, this option may not be right for you. Read on to discover other solutions that may help you.

The solutions

Credit consolidation

You can also pay off your credit card debts by consolidating them. This lets you consolidate your credit card debt along with any other high-interest debts, into a single loan.

Consolidate your debts into a single debt consolidation loan with a lower interest rate and make only one payment. Debt consolidation lets you spread your payments over a longer period of time (up to 5 years). What’s more, unlike a consumer proposal or personal bankruptcy, debt consolidation has no impact on your credit rating.

Consumer proposal

A consumer proposal is a debt-relief process administered by a licensed insolvency trustee. The trustee prepares a proposal for your creditors, in which they agree that you will repay a percentage of your debts. Credit bureaus such as Equifax Canada remove a consumer proposal from your credit file  after a certain period of time. Your credit file is back to normal three years after you have paid off all the debts in the proposal.

If none of these debt settlement solutions work for you, there’s always personal bankruptcy. This solution is a last resort. It’s a simple and effective option that allows you to get out of debt in a short space of time.

Finding yourself in debt can be stressful. But by following these suggestions, you will make significant progress in your credit card debt repayment. Once you’ve reached your goal, you’ll be in the habit of sticking to your budget. You will be building your credit rating and saving money for the future.

Contact M. Roy & Associés, licensed insolvency trustee in Joliette for a free consultation. We will guide you to the right solution for your financial situation and give you effective credit counselling. You can rely on our team to assist you in overcoming your debt faster than ever.

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