Credit cards can help you maintain a comfortable lifestyle and act as a safety net in case of emergencies. They can also help you build a great credit score. Different credit cards have different interest rates, and some are significantly higher than others. In addition, the more you spend, the greater the interest will become. Here are some tips to help you pay those high-interest cards off sooner rather than later.
One of the most popular ways of getting your interest down and allowing you to pay off one or more credit cards in a hurry is through consolidation. Balance transfer cards offer a period of time during which they do not charge interest on any debt transferred from other cards. This will allow you to pay your card for up to a year (depending on the card) before interest will come into effect. If you are particularly diligent and you pay everything off before that grace period is over, you will not pay any interest at all! This is ideal because a higher interest rate is applicable after this initial interest-free period comes to an end. It's also important to remember that a transfer fee is often applicable. It is usually a set amount or a percentage of the amount you're transferring across – whichever is greater. Also, if you fail to make payments during the promotional period or if you don't at least pay the monthly minimum on your statement, you will void this benefit, and you will start paying interest immediately.
Popular cards to choose from:
There are a number of credit cards that offer great balance transfer deals. The most popular of which include:
- MBNA Platinum Plus MasterCard with no annual fee, 19.99% interest rate, and a 0% interest rate on balance transfers for the first 12 months.
- Scotiabank Value Visa with an annual fee of $29, 0.99% interest rate on balance transfers and cash advances. After which a rate of 11.99% will apply. You also receive 20% off AVIS car rentals with this card.
- SimplyCash Card from American Express has no annual fee, and you earn 5% cash back on groceries, gas, and restaurants for the first 6 months (up to $250 cash back). You will earn 1.25% cash back on all other purchases during the introductory period. There is no limit to the amount of cash back you can earn after the introductory period comes to an end.
Personal loan or line of credit
Much like a balance transfer credit card, a personal loan or line of credit can help take care of your current debt. Use one loan to pay off all of your credit cards and then make a single monthly payment until your loan is paid off. In many cases, personal loans offer some of the lowest interest rates of all which is always advantageous. The two options differ in the sense that repayments on a personal loan are the combination of the interest charges and the principal amount. A line of credit is much like a credit card since you can pay it off and reuse it. Personal loans don't work the same way and, once you have paid it off, you will need to apply for a new loan if you require more credit.
If your credit score is not at its best, banks could be reluctant to offer you any kind of credit. Should this be the case, peer-to-peer lending is another option worth considering. For those new to this approach, peer-to-peer platforms are based online, and they facilitate the connection between lenders and borrowers. Lenders can set their own interest rates according to the amount agreed upon by both parties.
With so many options, there's no reason not to make the most of some form of consolidation in order to keep interest rates as low as possible and get your debt paid off before it becomes truly crippling. Another important tip when trying to pay as little interest as possible is to control your spending. The less you spend, the lower your balance and the less interest you will end up paying. At Wallet Savvy we have a comprehensive list of Canadian credit cards that will help you compare and choose the right one to suit your needs and budget.