Credit card debt – What to do if you're struggling

Friday, December 9, 2016 - 19:17

Money Management, Rebuilding Credit


Credit cards are a very popular way to make purchases large and small, on line or in the store. Using a credit card (and paying it off) is a great way to build your credit. They are also a great way to earn “points” towards vacations, groceries, and many other items. The problem is, if used irresponsibly, they can be detrimental. Credit card debt has always been among the most expensive ways to borrow, largely because it is unsecured and traditionally comes with a much higher default ratio.

If you’ve been reckless with your credit card, or if you have run into credit card debt because of unforeseen circumstances, the worst thing you can do is hide. The longer you wait, the more difficult the problem will be to resolve.

The first thing you can do is use my Debt Options Calculator to see how much it will cost to pay off your credit cards with interest over five years (it will be under the "Dig Out" option). One of the biggest traps that people fall into when they are trying to dig themselves out of debt on their own is making payments that just cover the interest charges but aren’t really reducing the principal.

If you are struggling to deal with your credit card debt and you want to pay back what you can afford then the best option might be a consumer proposal. By filing a consumer proposal, you are able to stop interest charges, prevent creditor collection action and settle your debt. While filing a consumer proposal temporarily damages your credit rating it is often the best approach for people dealing with large credit card debt.

Don’t make the mistake of focusing on your credit rating. While credit rating is important, improving your financial health is far more important. You can always rebuild your credit rating, but if you don’t have a plan to get out of debt you will continue to struggle. When I meet with people my focus is always on helping them to improve their financial health, getting out of debt and rebuilding their credit rating.

If you have any questions or would like review your case with me in person please do not hesitate to contact me.