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Smart strategies to tackle your bill.

If you’re carrying credit card debt, you’re not alone.Nearly half (46 per cent) of Canadians have credit card debt ― averaging $1,192 ― according to a BMO® 2015 Credit Card Report. In addition, 30 per cent of credit cardholders don’t pay their bill every month, and 32 per cent don’t keep track of their balance between billing periods.

Feeling stuck? By changing your habits and taking control, you can start tackling your monthly bill. Here are five tips for paying off your credit card debt:
Chart on Canada credit card debt

    1. Take a good look at your spending habits: The first step to cutting down your bill? Understand where your money is going. Build a spreadsheet to break down your monthly purchases, or download a budgeting app so it’s always with you.  It lets you break down your spending by category, create saving goals, and build a budget to help keep you on track.
    1. Trim your expenses: One of the oldest tricks is to trim your everyday spending. It all adds up, and by doing so, you’ll have extra money at the end of the month to put towards your debt. Consider eliminating one trip to the grocery store each month and stockpiling food items that are on sale, which can save a family of four about $2,160 a year on groceries. Making coffee at home as opposed to buying it, packing a lunch, and biking instead of driving to work are all great ways to come up with some extra cash to put towards debt.
    2. Get strategic with your monthly payments: Whenever possible, pay more than the minimum monthly balance. You need to pay more than the interest to start making a dent in your debt. Start bumping up your payments as you feel comfortable ― even an extra $20 a month can make a difference.

Have multiple cards? Credit Counselling Canada recommends paying the minimum payments on all cards except one. Make higher payments on the highest interest card until it’s paid off. Then, move on to the next most expensive card, and so on. This method can be an efficient way to get out of debt, and you’ll feel encouraged as you see the progress you are making.

  1. Lower your interest rate: If you’re often carrying a balance on your credit card, you may want to consider a card with a lower interest rate — this may help cut down the interest you pay each month so you can direct more of your hard-earned dollars towards your principal. And we know the more you can put towards your principal, the better. While you’re at it, search for a card with a lower annual fee (a few more dollars saved!), or search for one that provides cash back or a reward currency to help offset costs.
  2. Consolidate your loan: If you have multiple debts, you may want to consider consolidating your loans. With a debt consolidation loan, you can repay multiple debts and creditors at once. You can then start fresh and focus on one central payment ― and a loan may have a lower interest rate than a credit card. Want to know more? The Office of Consumer Affairs breaks down the advantages and disadvantages of consolidating.

Of course, you can also take more drastic measures ― from freezing your cards to cutting them up ― while you put your payment plan into action. (Be cautious about closing your accounts, though, as this could potentially lower your credit score.) This way, you won’t be tempted to use them and can focus on paying your debts back quickly. Once you do, maintain your debt-free status by paying your credit cards in full every single month.
For more tips on enjoying better financial health, find out how to change your spending habit into a saving habit.

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