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5 debt trimming tips

Posted on: December 27, 2017 | Author: Staff

Paying down credit card debt can feel like running an endless 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

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 cash back or rewards card is actually costing you money.

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 of 19 per cent or higher, which can really weigh you down. For example, if you carry a $3,000 balance on your 19.9 per cent rate card for a year, you're spending over $300 more in interest charges compared to a 10.9 per cent low-rate card.

When choosing a low-rate card, 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

Credit card cheques are blank cheques you get in the mail from your credit card provider. You can use them like regular cheques, but instead of the money coming out of your chequing account, it comes off your credit card.

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, 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).

Use your credit card for big purchases you can pay off in full. Use these cheques for big purchases you can’t. Interest will accrue daily, but at a much lower rate.

Finally, read the fine print to discover if there are transfer fees—and avoid them whenever possible. Some banks will charge a 1-3 per cent fee on top of a transfer.

4. Don't settle for the minimum.

Want a zero-interest credit card? Pay off your balance on time, in full, every month. Can’t do it? 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 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. Miss two consecutive payments, however, and your account is placed into default and your interest rate increases. The only way out? Make three consecutive payments and your account will revert back to its original state.

Avoid this debt drama by always paying the minimum (or more) before the monthly due date. Take advantage of automatic payments if your credit card offers them. Credit card debt is easy to create and hard to get rid of. By following these five guidelines, you'll have slimmer debt in just a few months—and that's a great start.

We’re listening—and we can help you pay down your debt. Learn more about ATB's low-rate credit card options by calling us 1-800-332-8383 or visiting your local branch.

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