KIM ASKED: What’s the best way to deal with huge credit card debt? I want to pay it off but with three maxed out credit cards, the interest alone is killing us.
Answer: There is no doubt that the interest on credit card debt can be a killer. Most credit cards have interest rates in excess of 20%. If you use my Debt Options Calculator you can 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 (see the effect of filing a consumer proposal on 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.
