How to get out when our credit cards are full?

Comment s’en sortir quand nos cartes de crédit sont pleines?

Your personal finances or family are in crisis ? Your credit cards are full ? There is a way out.

It is the debate of the hour : elected officials, consumer advocacy groups and ordinary citizens hope that the banks will lower rates on credit cards. It will not happen : even the Finance ministers are reluctant to prevent powerful financial institutions continue to cut the throats of their customers, while the rates on loans and mortgages have never been so low since the 1960s.

However, credit cards represent, for many consumers, the only form of credit in the event of an emergency. As a Quebecer in three is living a pay cheque to another, according to a survey from the canadian payroll Association, many of the newly unemployed will fold on their cards to pass through, while two incumbents on the five do not manage to bring their balance to zero each month… But there is a way out.

Change the map

Ask your bank or fund to transfer your balance to a line of credit, a personal loan, or negotiate a debt consolidation : you will definitely less interest. If not, ask for a balance transfer to a card at a reduced rate. The financial institutions say that they want to be accommodating in these times of COVID-19 : this is the time to prove it !

You can also apply for a new card elsewhere, using a comparator :

  • Comparison tool credit cards of the Agency of the financial consumer of Canada (FCAC) : https://itools-ioutils.fcac-acfc.gc.ca/CCCT-OCCC/SearchFilter-fra.aspx
  • Selector cards on the magazine Protect Yourself : protect yourself.ca
  • Selector RateHub : https://www.ratehub.ca/cartes-de-credit/meilleures-cartes-de-credit
  • Those of financial institutions

The RAC shows eight outcomes for the Quebec, ranked in ascending order of interest rate. The least expensive : Synchro National Bank (7.2 %, for an annual fee of $ 35), and Modulo Desjardins (10.9 percent, 50 $). The tool displays the annual fees and maximum interest rate on purchases, cash advances and balance transfers.

The comparator of Protect-shows You six results. The least expensive : The Real Line Gold MBNA 8,99 % (for an annual fee of 39 $).

PAY OFF A CREDIT CARD BALANCE OF $ 4000 IN 12 MONTHS

Map Rate Annual fee Interest paid Total cost
Current 21 % 0 $ 472 $ 4472 $
Low rate 9 % 50 $ For $199 4249 $

Source : RAC

Tips

  • Avoid at all costs, advances of funds and cheques and credit cards. You are paying unnecessary charges (up $ 5.50 or 4 % of advance amount) and interest shall apply at the date of withdrawal.
  • Avoid holidays payment : interest continues to run (up to 20 %, it costs a fortune).
  • Pay at least the minimum required, since the rate of several cards climb if you skip one or two payments : call the card issuer for its terms or negotiate an agreement.
  • Attention to the annual fees : the Visa Infinite Privilege Desjardins has a rate of 9.9 %, but a fee of $ 295 (member, “Desjardins”) and of $ 395 (non-member).
  • Take your time to use the tools of selection of cards.
  • Shop around : you should ask questions, but do not start never a credit card application in good and due form before you make your choice ; if you multiply the applications, you affect your credit rating.
  • Leave that to the award programs : you are in a situation of emergency. Adjust your money problems before you think about your future bonus points or insurance…
  • The annual fee for many cards to exceed the value of cash back or bonus points !
  • Divide your balance by six and schedule an automatic transfer to the two weeks since the bank account where your paycheck is deposited.
  • You are taken to the throat ?
  • Keep your old card to buy only food and immediately contact the ACEF in your area, it is free : toutbiencalcule.ca.

Offers a little too good to be true

You want to take advantage of an offer to 0 % to transfer your balance to another card ? Beware !

The comparator of credit cards RateHub displays 13 card offers with balance transfers, whose interest rates are below 2 %. Both display a rate of 0 % (The Real Line MBNA Gold and regular), a poster, a rate of 0.99 % (Visa Card, the minimum Scotia), a is 1.95 % (Discounts Tangerine), and there are eight to 1.99 %. The rate then go to 2.99 % and 3,90 %.

These offers are too good to be true ? In large part, yes.

Nothing is free

Please be aware that there is never nothing free in life. And even the discount you have to pay for. Are you saying that the credit card issuers are financial sharks.

Since the cards, with transfer of balances will always come with limits, which will reduce your financial flexibility. Those at 0 % you can do nothing to pay off before six or ten months, BUT impose an annual fee ($30 to $ 120).

The majority offer a period of grace (or promotional) of six months before having to repay something. After that, the rate of the card is often higher than that of your old card ! In addition, this new rate is often applied at the date of transfer of the balance, and not at the end of the promotional period.

It is thus necessary to repay fully the outstanding balance before this date. Even if it meant using a line of credit or a personal loan.

In addition, if you make purchases with this new card, the rate goes up to 8,99 % or more on all your purchases and balance transfers. And if you make cash advances, you may have to pay a rate of more than 12 % to 24 % at the date of the withdrawal at the atm ! Some issuers apply this rate to the entire balance of the card !

Issuers also require a minimum annual income (12 000 $ to 200 000 $) or a limit on withdrawals of money (often $ 500), as well as transfer fees, which represent 1 % to 4 % of the balance transferred.

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