Credit Card Debt: What to Do
Many people find themselves dealing with debt. “What’s the best way to handle credit card debt?” is a question that we hear quite often. Credit card debts and other debts can cause stress, anxiety and worse.
A 2015 Global News/Ipsos Reid poll found that 45 per cent of people are stressed about keeping a steady income, 40 per cent are stressed about saving for retirement, 33 per cent stress about paying bills on time and 31 per cent stress about credit card debt. These statistics show that Canadians are having troubles with finances and that credit card debt is a major contributor to the stress that they experience.
A study released by BMO in 2015 found that 46 per cent of Canadians are carrying credit card debt. The report also found that 52 per cent use their credit cards to make the majority of their purchases.
There is nothing wrong with using a credit card to make purchases. In fact, using a reasonable amount of credit and paying it back on time can help build your credit rating. However, when someone makes a lot of purchases on a credit card, it’s possible that he or she could end up charging too many purchases to the card and having the situation get out of control. The BMO survey found that 32 per cent of people do not keep track of their credit card charges each month. This can lead to problems. If you’re not keeping track, it’s easy to spend too much money.
According to that same BMO study, one in three people do not pay off their balance each month. This can lead to high interest charges and possibly trouble with credit card debt in the future. Even more troubling, 26 per cent of people pay off their credit card with all of their available funds, leaving them no choice but to go into debt for other expenses.
Reducing Credit Card Debt
High amounts of debt can be problematic. If you’re spending all of your money on debt repayment and other monthly expenses (food, transportation, rent/mortgage, etc.) you don’t have anything left over for savings or to deal with an emergency situation. If a pipe bursts and floods your basement or if your car breaks down and leaves you with a costly repair bill, you will need to go even deeper into debt in order to manage these expenses. The deeper and deeper into debt you go, the more difficult it becomes to get out.
As for the best way to handle credit card debt, there is no “best way” that works for everyone. Each financial situation is different. This means that a strategy that works well in one situation won’t necessarily be the best way to handle another situation.
Finding the Right Debt Relief Situation for You
If you are having trouble paying down your debts or if you’re unable to pay your bills as they become due, it often makes sense to speak with a licensed insolvency trustee.
A trustee in bankruptcy is a person who has been licensed and registered by the federal government. A trustee is able to review your financial situation and provide you with information on the options available to you. Many people believe that a bankruptcy trustee is only able to help you file for bankruptcy. This is not true. A trustee is legally required to provide you with all of the debt relief options that are available to you, even those that the trustee cannot assist you with. It is then your decision as to how you would like to proceed.
Budgeting, credit counselling, debt settlement, debt consolidation, consumer proposal and filing for bankruptcy are all options that could be available to a person who is struggling with debt. When you speak with a trustee, he or she will provide you with details on these different options and whether or not they are possible for someone in your situation. Most trustees offer the initial consultation for free,
so you can speak with one without worrying about how much it will cost you.
Despite how often we hear “What is the best way to handle credit card debt?” there isn’t one option that works for everyone. Once a trustee has reviewed your financial situation, he or she can then let you know what options are available to you. You’ll have the information you need to make an informed choice for your financial future.