Credit card debt because of reward points?
The quest for credit card reward points has caused many Canadians to overspend and get deeper into debt. We’re being lured by the promise of free trips, free merchandise, services and cash back. As a result we’re overusing credit and we’re left with monthly balances that are accruing high interest charges.
The 9 reasons people are being crushed by credit card debt
According to Canada.CreditCards.com:
- 52% of Canadian households had credit card debt not being repaid in full by the due date in 2014
- Credit card debt as of November 30, 2014: $75 billion
- Average credit card debt as of Nov. 30, 2014: $2,627 for each Canadian age 18 or over
- Average number of credit cards per Canadian adult: 2.9 in 2013 (including Visa, MasterCard and American Express)
- Canadian adult credit card holders carrying cards with rewards: 77% in 2013
- The average Canadian household has members belonging to a total of 8.2 loyalty programs
The US statistics are even more eye popping
According to nerdwallet.com:
- The average US household credit card debt stands at $15,706, counting only those households carrying debt
- Based on an analysis of Federal Reserve statistics and other government data, the average credit card debt per household is $7,327 on their cards
- Looking only at indebted households, the average outstanding balance rises to $15,706
What are your reward points really costing you?
Many Canadians don’t understand the true value of reward points. Typically reward points are worth 2% or less. However, annual interest rates are typically in the range of 20%. The reality is that if you’re paying interest on an unpaid balance then you’re really going into debt and not benefitting anything from your reward points. They’re costing you way too much for no return.
Start learning now how to pay off your credit card
TransUnion Canada says for every $1,000 charged in a given month, only about $600 will be paid off by the due date to avoid interest charges. Instead of focusing on reward points, make every attempt to pay off your credit card balance. If you are one of the many not paying off your balance in full each month, stop paying 20% in interest charges by:
- Making a budget and sticking to it
- Include some amount in your budget for paying off credit card balances
- Use cash, not a credit card, to pay for necessities
- Pay for everyday items with cash
When looking for credit card debt help, people normally first think of either a debt consolidation loan or a debt settlement company. Although these are two of the several credit card debt solutions for settling credit card debt, we caution:
- consolidation loans are also expensive and most times if you already have outstanding debt you may not qualify for such a loan
- we have written many blogs about the dangers of debt settlement companies, including, DEBT SETTLEMENT COMPANIES FINALLY TAKEN TO TASK IN ONTARIO
- The US Federal Trade Commission also warns about debt settlement scams
How to get out of debt? Take action right now!
Don’t add more debt to your existing debt and don’t ignore your debt! Contact a trustee for professional help. The Ira Smith Trustee & Receiver Inc. Team will evaluate your situation and come up with a solid financial plan to put you back on the right track. We will review your options with you on how to reduce credit card debt and eliminate it, hopefully using one of the bankruptcy alternatives. Call us today and take the first step towards living a debt free life Starting Over, Starting Now.