Credit card debt is sadly something that many Canadians have. However, just because many other people have it, doesn’t mean that you have to feel stuck and have it as well.
Credit card debt can make a person feel stuck in life, this is no surprise. Due to debt, you may not be able to pursue a dream job of yours, you may not feel comfortable doing things that you love (such as travelling), and it may affect your mood and attitude towards life.
According to credit bureau TransUnion, the average Canadian had approximately $27,131 in debt in 2013, which is a 3.5% increase over the average debt level in 2012. This $27,131 figure does not include mortgages, it only includes lines of credit, credit cards, auto loans and conventional bank loans. TransUnion believed that the average amount of debt in 2014 would increase over 2013 levels.
Even with these shocking numbers, I do believe that credit cards can be used responsibly and to your advantage. However, before that happens, you will want to eliminate your credit card debt for good.
Here are my tips to get out of credit card debt. If you follow the advice below, then before you know it you will be out of credit card debt and enjoying the life that you want to live.
Acknowledge how much credit card debt you have.
The first thing you need to do in order to get out of credit card debt is to tally up how much credit card debt you have.
Don’t estimate or use round numbers – actually look up your exact debt and write down the number down to the penny (or the nearest dollar).
Usually, when someone adds up their debt, they realize that they have a lot more credit card debt than they thought they did.
You may not have realized it before because you’ve never written it down or added everything up. Before, you might have thought that you had $10,000, but it might turn out that in reality you have $20,000. Yes, that is a big discrepancy, but I have seen it happen plenty of times.
Certain people never add up their debt just because it never crossed their mind. However, for many people it is also because knowing the exact figure makes their debt more “real.” They are afraid to face the actual debt that they owe, and estimating it might make the credit card debt nicer in their mind.
Figure out why you went into credit card debt.
Do you know why you went into credit card debt? This is very important to get out of credit card debt so that you do not continue to make the same mistakes in the future.
It wouldn’t be very good to eliminate all of your debt only to rack it all up again just a few months later.
If you go into credit card debt because you try to keep up with the Joneses, then you need to learn how to stop spending money just to compete with material items that others have. If you go into credit card debt because you think you “deserve” items (such as Starbucks everyday, a new car, etc.), then you need to sit down and figure out why you feel like you need to buy things in order to feel better about yourself.
Try to renegotiate your interest rate.
If you have credit card debt, then you may be paying a significant amount towards interest each month. If so, then you should try to renegotiate the interest rate on your credit cards as soon as you can so that you can get a lower rate.
It doesn’t hurt to try. They may say no, but they also might say yes to your interest rate request. You can start off by calling each company that you have credit card debt with and asking for a lower interest rate.
If they say yes to even just a 1% or 2% cut in your interest rate, that may mean a very large amount in savings each month.
Stick to a realistic budget.
If you don’t have a budget already, then I recommend you create one immediately. Some people do not have one because they do not think they need one. However, if you are in credit card debt then I’m going to assume you 100% need a realistic budget.
You should write down your expenses each month, and you can even put them in categories if you would like (housing, car, food, entertainment, savings, retirement, etc.). Then total your income each month after taxes so that you know how much you can truly spend each month.
Eliminate expenses from your budget.
If you are spending more than you make each month when you tally up your budget, then this is proof that you need to find areas to cut back in immediately. Try to find at least a few items where you can cut back or eliminate the expense completely each month.
Some ideas include: limiting your restaurant spending, cutting your gym membership and finding more frugal ways to workout, calling companies and asking for a discount (such as with your phone), eliminating your cable, and so on.
Increase your income.
Do you have extra time in your day? If you do, then you may want to look into additional ways to make income so that you can put your extra income towards your debt each month.
Extra income can be a great way to pay off debt because it is money that you wouldn’t miss otherwise – just make the money and put it immediately towards debt.
There are many ways for you to make extra money. Some may make you money right away, whereas others (such as freelancing) may mean that you have to work for free or cheap for a few months to improve your portfolio before someone wants to hire you.
Side job ideas include: working at a retail store, babysitting, walking dogs, writing online, graphic design, bartending, and so on.
Pay more than the minimum payment each month.
If you are serious about paying off your credit card debt, then you should be working as hard as you can to pay more than the minimum payment each month on your debt. Paying only the minimum payment each month usually means that you will be in debt for longer than you would probably like.
However, if you have debt with a higher interest rate than others, then you should be working to eliminate the debt with the highest interest rate first so that interest is not continuing to build on this high debt for months to come. This means that you may be paying as much as you can on high interest rate debt while only paying the minimum on low interest rate debt.
What are you doing to get out of credit card debt?