How To Pay Off Credit Card Debt — For Good

What is credit card debt and how does it affect Canadians?

It’s as simple as it sounds — credit card debt is simply the total of all outstanding balances on your accounts. As credit card debt builds, it can negatively impact your credit score and your future ability to qualify for additional credit such as credit cards, mortgages or other kinds of loans. And if you’re paying off debt, that means less cash available for your everyday needs.

If this is an area of life you’re struggling with, you’re not alone. Many Canadians owe money to lenders of all kinds. Not only can this be expensive if your debt has grown to an unmanageable amount, but it can also add up to tons of stress.

Assess your current credit card debt

The first step in working toward a solution is to take a hard look at your finances. Be honest about what is working and what isn’t. And consider writing down every detail with a pen and paper — it can make the numbers feel more real.

Keep a list of the balances you’re carrying, and note the interest rates and minimum payments on each card. Once you’ve identified the baseline amount that you must pay off in interest and minimum payments, you can start looking for areas in your life where you can cut spending to put towards paying back your credit card debt.

Exhaust the basic options to pay off credit card debt first

Depending on the amount you owe and your income, it is possible to create a payback strategy on your own — even if you’ve had problems paying off credit card debt in the past. First, make sure you’ve investigated all the basic strategies for correcting credit card debt.

• The first is debt consolidation – this means merging all your debts into a single debt. Rather than juggling multiple monthly payments, each with its own interest rate, this type of loan lets you consolidate your credit card debt into a single balance with a potentially lower interest rate. Pre-approved American Express® Cardmembers can apply for American Express Personal Loans, which are unsecured loans with no collateral required and no impact on your credit score1, all at a personalized fixed APR.
  
  
• Two other popular options are the debt snowball method and the debt avalanche method. For the snowball, you pay off your credit card balances one at a time, starting with the smallest one. For the avalanche, you pay off the highest-interest balance first. Both methods start slow and help you gain momentum so you can tuck away more and more money to pay back your remaining debts as efficiently as possible.

Get professional help if you need it

Certified financial planners aren’t only useful for managing assets and investment accounts. The right one can work with you to assess your finances and create a budget that can help you reach your short- and long-term financial goals and set you up for a debt-free future. Sometimes an outside eye can help you focus your strategy and alert you to options you may not have considered before.

If you’re falling short on income to cover minimum payments, not making income at all or supporting family members as bills mount, it can feel impossible to imagine a life of financial freedom. But asking for help can be a good first step.

What if I keep having problems paying off my credit card debt?

Depending on the amount you owe and your ability to pay it off, you could also consider credit counselling, where professional money experts will assess your finances and come up with a debt-management plan that works for you.

How can I stay out of credit card debt for good?

Once you pay off credit card debt, it can be easy to get back into the cycle if you repeat old habits. You can avoid this with a few simple tricks: maybe you set aside specific amounts of cash for your daily purchases, or keep only one or two credit cards and pay back the full statement balance(s) every month. And if you are using a Membership Rewards^® enrolled card, pay for almost anything with points with Use Points for Purchases².

Choosing the right type of credit card for your needs can also help you stay on track with your goals. American Express offers a variety of Cards with different benefits that suit a range of financial needs. Here are a few options that can help you get what you want.

• No-annual-fee cards: These Cards often come with fewer rewards and benefits, but you won’t have to pay an annual fee every year.
• Cash back cards: The SimplyCash^TM Preferred Card and the SimplyCash^TM Card from American Express^® SimplyCash Cards let you earn cash back on each qualified purchase, which you’ll receive as an annual statement credit.
• Rewards cards: These Cards earn points that can help you maximize your budget. With the right credit card and the right budget, you can earn points towards eligible purchases.