Some people can manage their credit cards, but many find themselves in
difficulty at the end of each month. You may be in this leaky boat it you
have a handful of cards and are unable to pay them off in full each month.
You’re in trouble if you can’t make the minimum payments on some or all of
them. And you’re in crisis if you’re getting past-due letters, phone calls,
or personal visits by debt collection agencies.
If you’re in this sort of predicament and find you’re living paycheque to
paycheque, try to pin down what you’ve been using your credit cards for.
Several large one-time purchases, like appliances or home renovations, can
add to the debt load very quickly. And this is manageable through a
disciplined saving program, or a balance transfer to a personal line of
credit or short-term personal loan where the interest rate is much, much
On the other hand, if you use credit card like a bank machine, largely on
impulse purchases (everything from your coffee run to lottery tickers),
you’re engaging in bad borrowing behavior and you need to make some drastic
changes, starting with some serious spending controls.
How to control spending
Start with a budget. Determine how much you spend each month and subtract
it from your take-home pay. If you’re spending more than you make every
month, you’ve identified your problem. Now you have to create a budget that
itemizes what you’re spending your money on. Cover the essentials first,
like rent or mortgage, food, car payments, and utilities. What’s left over,
mostly those “little” impulse buys, are what’s adding up to your credit
If you have multiple cards, remove those with the highest annual interest
rates place them in an inconvenient, difficult-to-access place. Leave only
one card with the lowest, most favorable rate available for emergency use.
In other words, when you find yourself in a hole, stop digging! Make a rule
that if you can’t pay cash (or use a debit card), don’t buy it!
How to pay credit card balances
Paying off large credit card balances might seem like 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 mountain.
1. Minimum payments.
Pay at least the minimum monthly payment on every card. Add more to at
least one card with the highest interest rate.
2. Balance transfers.
A zero-interest balance transfer to a different credit card under a
time-limited promotion could give you breathing room of as much as six
months with no interest. Any monthly payments you make to the new card
would go directly against your principal amount. Be sure to check terms and
conditions after the interest-free period expires. Do not use the old card
again. And remember that if you go this route, you are in fact applying for
a new credit card and it goes on your credit record.
3. Rate switch.
You may be 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. What you spend on the annual fee (anywhere from $99 to $150
per year) will be offset by savings on compounded interest payments. Get
more information from your credit card company, often your bank, which is
always pushing premium cards anyway. Again, if you go this route, be sure
your old card is cancelled.
4. Line of credit.
Consider paying down some of your credit card balance using your line of
credit, where interest rates are considerably lower. But use personal lines
of credit sparingly, and make sure you pay off at least the scheduled
minimum amount, preferably, more each month.
5. Personal loan.
This involves taking out a personal loan at lower interest rate to pay off
higher-interest credit-card loans. Your bank’s loan officer can work out a
payment schedule to fit your budget. Remember to lock away all credit cards
(with the possible exception of one low-interest card) until that personal
loan is paid off.
6. Getting help.
Finally, be skeptical of so-called “credit counselling services,”
especially of the strip-mall, store-front variety. You may end up in an
even worse debt crunch than before. If you’re concerned about credit card
debt problems, talk first to your bank or consult with a fee-for-service
financial planner or advisor.
Although it’s tempting if you’re in a real bind, avoid declaring personal
bankruptcy. Bankruptcy is a legal morass and will impede your ability to
borrow and conduct your other personal financial and business affairs,
including investing, for years to come. So make every effort to fix your
credit card crunch using the tactics I’ve outlined here. It takes
persistence and fiscal discipline, but it can be done. – Robyn
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
© 2017 by the Fund Library. All rights reserved. Reproduction in whole or
in part by any means without prior written permission is prohibited.
The foregoing is for general information purposes only and is the opinion
of the writer. Securities mentioned are illustrative only and carry risk of
loss. No guarantee of investment performance is made or implied. It is not
intended to provide specific personalized advice including, without
limitation, investment, financial, legal, accounting or tax advice. Please
contact the author to discuss your particular circumstances.