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Take Advantage of Debt Consolidation
Consumer debt is at an all-time high. Unfortunately, credit card companies seem to charging more and savings accounts seem to be yielding less. One way that many Canadian citizens are finding ways around this is through balance transfers and debt consolidation. This is a strategy that works because most people can barely afford to pay all of their bills every month, let alone their full balances.
If you want to get ahead of this financial crisis, paying off your credit cards is usually the most immediate thing that you can. This is difficult because you have to make several payments every month to different companies and if you miss a month, you will quickly fall behind with all the late fees.
If you use balance transfers credit cards to consolidate your debts you can often take advantage of remarkable introductory offers as low as 0% for 6 or 12 months. This should give you enough time to put together a budget and get them paid off before the adjustment period begins.
By doing this you reduce your total liability because you are only responsible for one payment a month, and more than likely this payment will be lower than that total amount you had been paying. You can take the savings and put it in a savings account, or more importantly continue to pay what you had been paying in order to get them taken care of.
Avoiding the Issue
Whether or not you have bad credit, you can still use prepaid and secured cards to help you avoid the idea of paying fees. While these are often particularly designed for the credit-conscious consumer who needs to recover from a bad credit score, you might appreciate them because they are simple and convenient. Prepaid debit cards act like credit cards, except that you have to deposit money into their accounts before you can use them, which is similar to the check card you might have with your bank.
The reason why these are a good idea is because prepaid debit cards can report your actions to the credit bureaus, which help to establish a new credit history for you. Also, prepaid debit cards are nearly without fees. Some of these fees will be waived if you follow certain guidelines like using direct deposit to put money in your account. You probably already do that with your bank anyway.
Secured cards are more like credit cards in that they charge you interest rates and the like. The big difference is that you have to put down a security deposit, much like you would if you were renting an apartment or another big ticket item. This deposit is basically a good faith payment that you will not default or miss a payment. If you do, the company can close your account and keep your money.
However, if you maintain a good relationship, you get that money back when you close the account. If you can qualify for a card like this, you can take advantage of the higher credit limits and lower interest rates while re-establishing your credit. When you are ready for a more traditional credit card, simply close the account and get your deposit back.
Finally, there are other credit cards that you can use that offer you rewards for using them. These are particularly useful if you are keen with your budget. For instance, if you have a card that offers cash back rewards on things you buy every day, you can use the card instead of cash and then pay off the balance at the end of the month.
You will not pay interest on it, but you still get credit towards your cash back rewards. You need to be aware, however, of how each card works as some only pay on gas purchases and groceries, while others payout extra bonuses on a rotating catalog of products. One month you might get 5 times the cash bonus on restaurant dining while the next month it might be on home improvement product.
Sometimes, it is actually a good idea to get a store credit card, if there is a particular store where you like to shop. If a portion of your monthly budget is spent at a particular store and they offer a store credit card, you might be able to save a significant amount of money every month with the rebates they will offer you. Be wary, though, because store cards limit your ability to shop elsewhere.
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