Get rid of that high interest credit card

Get rid of that high interest credit card

The debt load for Canadians is at an all-time high, and a lot of it is coming from that oh-so-convenient credit card in your wallet. The APR (annual percentage rate) can be hefty enough to impede your ability to pay off the debt. If your monthly bill has an unpleasant surprise mixed in with the purchases, build your financial literacy by learning ways to get that APR under control.

Why might the APR be so high? Check out the kind of card you are using. You may have a card that comes with rewards, which are enticing, but nothing like that comes for free. Next, review your spending pattern.

You may have taken out some cash advances, which often incur hefty interest charges right away. Get in the mindset where that bit of plastic is used for essential purchases only—and anything else is really a costly personal loan reserved for emergencies.

You must make your minimum monthly payments; that is how to protect—and improve—your credit score. If you fully pay off your credit card balance each month, on time, you likely won’t be charged interest. But if you can’t do that, then a balance transfer to a lower interest card may be a good option.

Shop around to see which lenders are offering favourable rates and terms. These cards can come with a low, or even zero percent, interest rate for a specified term, such as 6 to 10 months. Sound like a great option? It is, if you consider this as a temporary solution and work to get that balance paid off. It can save a huge amount of interest.

Every purchase you make on the new card will immediately be charged interest, so plan your spending carefully. Also, some lenders charge a fee for a balance transfer; and there may be an annual fee to use the card. Factor these costs into your strategy for paying down your debt.

Remember, your lovely low interest rate is just for a few months. Then the interest rate will go back to the usual APR for the card. You must know what that is and how it will affect any outstanding debt.

Consider a balance transfer card as part of a strategy to bring down your debt fast. Set a goal, in terms of monthly payments, and stick to it while that promotional rate applies.

Here’s a great idea: take the interest you would normally pay and put it into the bank as part of your wealth plan. In three to four months, you could have your debt paid off, a healthy credit rating, and money in the bank.

Your financial advisor can help you learn other ways to build wealth. If you don’t have an advisor, give us a call – we’d love to hear from you.

28 thoughts on “Get rid of that high interest credit card

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