Credit card rules: How to wean yourself off credit card debt
As seen in BC New Home Guide.
The Canadian government implemented credit card regulations that increases transparency and protects consumers. Here are some of the regulations:
Credit contracts and application forms must have a “summary box” that clearly explains interest rates, fees, and how long it would take to fully repay a balance if only minimum monthly payments are made. Banks must give advance disclosure of interest rate increases, even if this information is already in the credit contract.
You must give your consent before your credit limit can be increased.
If you transfer your balance to a lower-interest card, your payments now have to be allocated in your favour.
There’s now a limit on certain debt collection practices used by financial institutions.
Banks can’t charge over-the-limit fees resulting from holds placed by merchants.
You have a minimum 21-day interest-free grace period on all new purchases if you pay your outstanding balance in full by the due date.
While critics don’t think these regulations go far enough to protect the consumer, at least the government is trying to make an effort to help consumers avoid predatory lending practices. And that’s a good thing.
However, an even better strategy is to start weaning yourself off of credit card debt. Unlike taking out a mortgage to buy a home or revenue property, buying stuff with your credit card at high interest rates doesn’t yield any returns – it simply gets you deeper in debt.
The following are some tips to help you use your credit card responsibly so you don’t pay unnecessary charges and get in trouble with credit card debt:
When you pay for something with a credit card, you are taking out a loan and you have to pay it back.
Pay the balance in full each month
If you can’t pay it in full, pay as much as you can
Don’t make only the minimum payment
If you always carry a balance, get a low rate card
Pay a few days before the due date
If you have a line of credit, transfer the balance to your line of credit with a lower rate. The goal is to pay down your debt and not go further into debt.
Put yourself on a budget, take a part-time job (or start a home business) and eventually get your credit cards paid off. You will be astonished how much extra money you will have to invest in assets that actually appreciate in value and put cash in your pocket!