Top 3 Reasons to Pay Off Your Overdue Credit Card Balance
March 2, 2016
Have you ever felt alone in your struggle with overdue credit card balances? Does your debt never seem to disappear no matter how hard you try to save?
You’re not alone.
Credit card debt is a serious issue affecting millions of Canadians. In fact, a recent National Omnibus Survey commissioned by Borrowell found that 56% of Canadians struggle or have recently struggled with credit card debt. Here at Borrowell, we believe there is no reason for any shame in this struggle. Our goal is to lead a proactive conversation that empowers Canadians to bring their overdue credit card balances and debt obligations to $0.00 (won’t that feel good?).
Without further ado, here are the top three reasons to bring your credit card balance to zero:
Improve Your Mental Health (and Close Relationships!)
It is well known that sleep is important for maintaining both physical and mental health. Nearly 2 in 5 Canadians have indicated that they have lost sleep due to credit card debt. Perhaps even more shocking are the invisible stresses of credit card debt: we found that over 14% of respondents who carried credit card debt admitted to having hidden credit card debt from their spouses.
Why lose sleep over credit card debt: a problem that has solutions and can be solved? One option is to save and pay off that credit card balance as soon as possible. If you have the cash available, we recommend to do it as soon as possible and not let the banks collect high interest any longer. If you don’t have the funds to spare, there are smarter alternatives available.
Save On Interest Expenses vs. Your Existing Credit Card Balances
The typical annual percentage rate (APR) for fixed-rate credit cards in Canada is 19.99%, and department store credit cards charge as high as 29.99%. There are much better options. Depending on your situation, you can easily save thousands of dollars and get out of debt sooner by paying off your balances with a personal loan.
With a loan from Borrowell, you can pay off your credit card balances today and consolidate everything into one convenient monthly payment. And you can do it immediately using our simple, online process.
Need to be further convinced? Let’s take a look at the numbers.
Let’s say you have $7,500 in credit card debt on a fixed rate credit card at 19.9% APR. Making the minimum monthly payment of 2%, your total interest cost would be about $8,621. And it would take you 9 years to pay off the debt. And that’s if you do not continue to charge new debt on the card balance.
Now let’s say you are approved for a $7,500 13.5% APR loan with a 3-year term. A wise choice would be to use these funds to pay off your credit card balances to zero. This would save you $6,000 in total interest over the life of the debt and allow you to get out of debt 6 years sooner.
Borrowell’s rates start at 5.6% APR, but clearly even a relatively higher rate can bring significant savings and help you get out of debt sooner.
Say No to “0%” Balance Transfers. End The Cycle of Credit Card Debt.
Let’s think about something for a moment: why do credit card companies offer low interest balance promotions in the first place? Because they want you to keep the debt rather than pay it off. The banks and credit card companies often try to lure consumers with tempting offers that seem reasonable, but if you aren’t careful and don’t read the fine print and follow the rules to the letter, you can get yourself in trouble.
A low (or zero) interest rate balance transfer seems pretty great, right? The only problem is, six months later you’re back to 19.99% or 29.99% APR and still in debt. By design, the debt never goes away until you pay it off in full. Rather than transferring your credit card balance to yet another teaser rate credit card, personal finance writers such as LifeHacker’s Kristen Wong recommend ending the cycle of credit card debt by paying it off completely.
After all, it is in the interest (pun) of the banks to have you continue to hold your credit card balance with that bank rather than pay if off completely.
If your goal is to get out of debt for good, your first priority should be making decisions that help you achieve that goal. A balance transfer may seem like a short term panacea, but you are really just extending your debt across a longer time period. That’s why it’s a balance transfer and not a balance eliminator.
If you bring your balance to zero today, you will improve your position in the long term. A debt consolidation loan is a perfect balance eliminator. One of the great things about consolidating your credit card debt with Borrowell is that we offer fixed interest rates, which also means your regular monthly payment will never go up. Your fixed monthly payment also helps pay down your loan balance – so at the end of the 3 or 5 year term, your loan will be fully paid off, no matter what happens.
See you later credit card debt. Enjoy that zero balance life and enjoy a few thousand more in your pocket.