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5 debt trimming tips

Posted on: February 29, 2012 | Author: Staff

Let's face it—we all know what it's like to go a little overboard on our credit cards. For many of us, paying down debt can feel like running a never-ending marathon. If you're struggling to keep up, here are five great ways to trim that debt fat:

  1. Give your current credit card a financial fitness test.

    Start with these assessments: What's your current interest rate? How often do you carry a balance and pay interest? How much interest have you paid so far? Look through your old statements and do some quick math. You may be surprised to learn that your great cash-back or rewards card is actually costing you more than you are earning.

  2. Look for fixed low-rate card options.

    Reward points or cash back bonuses are meaningless if you're spending the same (or more) on interest charges. Some rewards credit cards carry interest rates at 19% or higher—if you're paying interest, these rates can really weigh you down. For example, if you carry a $3,000 balance on your 19.9% rate card for a year, you're spending over $300 more in interest charges compared to a 9.9% low-rate card.

    When choosing a low-rate card, you'll want to check if the rate is fixed or variable. Variable rates will change with your bank's prime rate; fixed rates are much less likely to change without notice.

  3. Check those credit card cheques.


    You know those cheques you get in the mail from your creditor? Before you slip them in your wallet (or throw them away), check the interest rate and transfer fees. If the rate is lower than your current credit card interest rate, you should consider using these cheques to transfer a balance. This will allow you to move your high-interest balance to a low promotional rate for six months (or longer), which will help you pay down your debt.

    If you can pay off big purchases in full on a monthly basis, use your card for these purchases. However, if you can't pay off the balance in full, you can use these cheques as a source of low-interest funds to pay for your big-ticket items. Interest will accrue daily, but at a much lower rate—ultimately saving you money.

    Finally, be sure to read the fine print to discover if there are any transfer fees—and avoid them whenever possible. Some banks will charge a 1-3% fee on top of a transfer. ATB typically doesn't charge these transfer fees.

  4. Don't settle for the minimum.

    Want a zero-interest credit card? Pay off your balance on time, in full, every month. That can be tough, so the next best thing is to pay as much as you can—always more than the minimum. The more you pay each month, the faster you reduce your debt and the less interest you'll pay.

  5. Never miss a payment.

    Banks like financially responsible clients. By making regular payments to your credit card, you can continue to enjoy low rates and quality rewards. So what happens if you miss two consecutive payments? Your account is placed into default and your interest rates increases. The only way out is to make three consecutive payments; if you do this, your account will revert back to its original state. The easiest way to avoid this debt drama is to always pay the minimum (or more) before the due date each month. Many credit cards offer automatic payment arrangements—take advantage of these to stay on top of your payments.

Credit card debt is easy to create and hard to get rid of. By following these five guidelines, you'll have slimmer debt by summer—and that's a great start.

If you want to learn more about ATB's low-rate credit card options, stop by your local branch.​

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