If you’re anything like me, you recently got a fat envelope in the mail. Nope, not an expected windfall of cash – it’s the post-holiday credit card bill! All those thoughtful presents, rounds of drinks for your friends, and gifts for the various hosts and hostesses you visited over the holidays sure can add up. If you’re facing a daunting due date and don’t have the cash on hand to handle it, here are some suggestions on how to get by.
Line Up Credit
The easiest way to perpetuate a cycle of debt is to carry a balance on your credit card. Even the so-called “low interest rate” credit cards charge 10 or 20 times more than the amount of interest your bank will offer you with your savings account. Many retailer cards charge about 30 per cent interest on balances. You could get a better rate with a loan shark. (Granted, your local branch manager isn’t likely to break your kneecaps if you’re late with a payment…)
The point is, if at all possible, you should never carry credit card debt. Provided you have a decent credit rating and/or a steady source of income, you should be able to qualify for an unsecured line of credit. The interest rate on those is usually just a couple percentage points above the prime lending rate (i.e. a fraction of what a retail credit card charges). Iff you have collateral you can put up (like a home or car that’s paid in full) you can qualify for a secured line of credit at about prime. Either way, use this to pay your bill in full and you’ll be much better off.
Take a Transfer
If you’ve already maxed out your credit, or just find yourself in a short-term bind, another option to consider is a balance transfer. If you need a grace period plus a little time to build up some capital, Scotiabank has the Value® VISA card that charges 0.99 per cent on balance transfers for the first six months, and only 11.99 on new balances. (You will, however, have to pay a $29 annual fee.) Click here to explore all your balance-transfer options.
Dealing with Bigger Debt Problems
Perhaps you’ve been fearing the bad news the mailman delivers for a lot longer than just the post-holiday period. If your debt situation is so large that balance transfers and lines of credit won’t cut it, it may be time to seek some outside advice (beyond what a personal finance blog can offer). Non-profit credit counselors can walk you through the pros and cons of options like debt consolidation (where various debts are pulled together under one lower-interest loan with often more-flexible terms) or help you determine if bankruptcy is right for you. You can find an accredited counselor in your area at the Canadian Association of Credit Counselling Services’ website.
Looking for additional information on debt consolidation and your bankruptcy options? Check out this blog for more detail.