Canadians with high credit card balances should consider consolidating their debt, paying off credit card debt fast, and researching the grace period offered in order to avoid high interest rate fees.
If you typically have a high balance on your credit card, you’re probably familiar with the interest rate fees associated with this kind of debt. Annual percentage rates (APR) for credit cards in Canada are calculated based on compound interest – a calculation based on the initial principal as well as the interest rate that you’ve already accumulated on your credit card. Some credit cards charge up to 29 per cent in interest rates if you fail to make a monthly payment.
It’s possible to find a credit card in Canada that offers a low APR or variable interest rate, however these types of credit cards are difficult to acquire when you have less than perfect credit. What’s worse, credit card companies can raise your interest rates and fees if you fail to make payments on-time and in full each month. If you’re constantly paying extra money in fees every month because of your credit card balance, these three hacks can help you avoid dealing with pricey interest rates.
1. Pay Off Your Credit Card as You Use It
For some, paying off a credit card in full each month seems impossible to do because of high balances. When you let your credit card debt build up, managing it can be a frustrating process. As credit cards are a form of revolving debt, which means money is available to use after you’ve paid it off, it becomes easy to lose control of credit card spending. With a credit card, you are able to make payments anytime that’s convenient for you.
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When you make payments on your credit card debt after you’ve used it, you’re able to keep your balance down while also building your credit up. The best way to handle credit card debt is to pay the balance off in full each month. If you pay off your credit card while you spend, you’re more likely to pay off your card in full each month. Not only will this help build your credit, but it will also mean that in the future you’ll have a better chance of getting approved for loans with lower fees and rates. If you’re comfortable with online banking, consider setting up automatic payments to ensure that you never miss a payment.
2. Understand the Grace Period
The grace period of a credit card is the time between a bill cycle ending a new cycle starting. If you’re not familiar with the grace period on your credit card, the best thing to do is to contact your financial institution or look at your online banking to see when your next credit card bill is due. Knowing when you can pay off your credit bill without interest can save you from having to spend extra dollars in fees. When you know the due date on your credit card payments, it makes it easier to manage debt and make payments.
3. Consolidate Credit Card Debt
If you have a lot of credit card debt on more than one card, consolidating your debts with a personal loan can help you save money on added charges and fees. Credit cards are a form of unsecured debt, which means they don’t require an asset to have, like auto financing or a mortgage. Although transferring your unsecured debts onto a loan with lower interest rates and fees could help you save money, it won’t erase your debts. You’ll still be required to pay back the full amount, but instead of having multiple cards each with different rates and fees, your debt will be combined into one loan with potentially lower fees. If you’re overwhelmed with your credit card debt and need help managing your finances, visit Fresh Start Finance right now!
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