Bank of Canada governor Mark Carney has repeatedly said that household debt in Canada is the “number one risk to the Canadian economy.” That debt includes Canadian and Ottawa mortgages and second mortgages, as well as consumer debt such as credit cards. And when you’re talking about the debt that hurts the household the most, it’s this last one that really does people in. But what can you do about credit card debt? And that balance that just continues to grow and grow every month, no matter how much money you put on it? Sadly, if you’ve gotten yourself in deep with credit card debt, there aren’t a whole ton of options at your disposal. But you do have a few, and they should be put to good use as soon as possible.
First, find out what your interest rate is and then call your credit card company. No one wants to do it, but if you want to lower your credit card debt, it’s a step you simply cannot avoid. Call them, explain that you’d like to pay your debt off as quickly as possible (they’ll be happy to hear it!) and then ask for a lower interest rate. Credit card companies can charge astronomical interest rates, as much as 23%, and that’s the sole reason why your debt keeps climbing even when you continue paying. Ask for a lower interest rate – it’s your first step to saving money and paying off that debt sooner.
They said “no” the first time? Ask to speak to their supervisor. If the supervisor says they can’t lower your interest rate, ask to speak to a manager. If the manager says “no,” call back the next day. And the next, and the next, if that’s what it takes. No, these companies are not going to jump at the chance to lower your debt and take a loss in profits. But they might just jump at the chance to get that annoying customer off their back that really just wants to pay their debt off faster.
If you have come across a large amount of money, such as from an inheritance or another windfall, but you still don’t have enough to pay off the debt entirely, call the credit card company and ask about a debt settlement. Debt settlements are an arrangement in which the company will agree to take less than the full amount you owe them, if you are able to make that large payment all at once. Why would companies jump at this offer? Well, they may not leap out of their chairs trying to catch the offer while it’s still in the air, but they will be happy that your debt will be paid off very, very soon, even if it’s not the full amount.
A couple words of caution about debt settlements. First, always ask that the agreement be drawn up in writing and sent to you; and do not make any payment until you have received this letter. Second, use debt settlement as your last option and if you really believe that you’ll never be able to repay the full amount on your own. These settlements can show up on your credit report in the form of “chose a settlement,” or “paid majority, but not full, balance.” That can hurt you in the future, as creditors can still be wary of loaning to you, thinking that they’ll never get the full amount back.
And really, the whole reason you’re paying off your credit card debt (aside from the fact that Canadians want to take responsibility for their debt) is so that you can clean up your credit and start being loan-worthy again!
