Whether for good reasons or bad, you have more debt than you’d like. It may be high interest credit card, store card, term loan, sales financing, or some other form of debt. Don’t panic. There’s a way out.
Avoiding your credit card bills won’t make your balances go away. Tackling them head on will. There are several strategies to help you reduce your interest rates and get rid of your credit card debt quickly and cost effectively.
1. Balance Transfer Credit Cards: If you’re paying a high interest rate on your credit card debt, a balance transfer can help you cut your interest rate to 0%.
Balance transfer credit cards are simple. You shift your high interest credit card debts, to the lower interest balance transfer card. Your high interest debts are then paid down, and your previous debts are then owed to your balance transfer card, at the much lower interest rate.
There are many balance transfer offers in Canada. Some of the best promotions offer 0% balance transfers for 12 months with a low 1% balance transfer fee. That’s an interest free holiday for a full year.
You’ll want to continue making the largest monthly payments you can, since 100% of those payments will be applied against your balance, as opposed to interest, getting rid of your debt faster.
If you end up with a balance at the end of the promotional period, you can shift your remaining balance to another low rate balance transfer card.
Simply rinse, wash, repeat.
2. Secured Line of Credit: If you own a home you can use a low interest home equity line of credit to pay down your high interest debt. You’ll then owe the same amount of money on your home equity line of credit, but at a much lower rate.
The only time you’ll want to avoid this strategy, is if you believe you may have difficulty paying back your debts. A home equity line of credit is secured against your home. If you fail to pay back the loan, the bank can seize your house.
3. Negotiate: Believe it or not, banks are willing to negotiate. Call your credit card company and ask them if they can cut your interest rates. Many offer lower rates for a small fee, well worth the interest savings. Others can cut your rates for free. Be prepared to offer a good reason as to why they should lower your rates i.e. you received a balance transfer offer, you lost your job, etc…
Credit card debt can be debilitating. Don’t get intimidated. Start by putting together a list of all your credit card debts and their corresponding interest rates. Tackle your most expensive debt first.
Lastly, don’t be late. If you’re late on your balance transfer card your promotional rate will be replaced with a much higher interest, likely exceeding 20%.
Marc Felgar is a credit card expert & online entrepreneur from Montreal, QC. He is the CEO and founder of http://www.GreedyRates.ca, which helps Canadians find the best credit card through online comparison tools, filters, credit card reviews and the latest deals and offers in the marketplace.