My credit card bill arrived the other day and being just before Christmas, I opened the bill with one eye closed fearing the worst.  The first thing I did was to check the "minimum payment this bill" section – and thankfully didn’t pass out!  Then I noticed something that I hadn’t before – there was a note under my long list of purchases telling me how long it would take to pay off this bill if I continued to make only the minimum payments.  My credit card company had thoughtfully calculated that it would take approximately 4 and a half years to pay off this one bill!!  Suddenly this didn’t seem like such a great option when you take into consideration interest rate charges and future purchases….  It got me thinking then, how do you save with the way that you pay?

Every day we are faced with the question of how are we going to pay for this purchase?  Have you really thought about it or has it simply become an “automatic” reaction?  As consumers, we have various payment options available to us and there are easy ways for us to save money and help to pay down debt.

It pays to use cash – one bonus is that using cash can help you stick to your budget.  It is important to remember, however, that you should make efforts to only withdraw cash from your financial institution’s ATM; otherwise you could be facing additional transaction costs for using a different ATM.  Another thing to remember is, as tempting as it may be; avoid taking a cash advance on your credit card since interest will be charged on those funds immediately.

Think before you “debit” – we Canadians certainly love our debit cards, but as convenient as they are, it is important to ensure that they are used responsibly.  Check with your bank about the number of transactions you are allowed free each month and what the charge is above that number.   These extra fees can have a way of adding up.  

Should you really “buy now and pay later”?  - sure at the time it sounds like a great idea, but are you actually paying more for your purchases in the end?   “Carrying a balance on a credit card increases the cost of everything you purchase with the card due to the amount of interest you pay,” says Ursula Menke, commissioner of the Financial Consumer Agency of Canada (FCAC).  Make it a goal to pay off your balance in full every month to avoid paying interest charges.   To be honest, credit cards are convenient, but they can also encourage bad spending habits that may lead to financial trouble down the road.
 
For more information on how to pay down your debt or to receive a free financial assessment, contact one of our mortgage specialists today!