13 Jan London Licensed Insolvency Trustee on Credit Card Debt Severity and How it Leads to Consumer Bankruptcy
Credit card debt is a real and growing problem in south-western Ontario and across Canada. According to a recent report in the Globe and Mail’s Report on Business, the average credit card balance rose a whopping 5.7% in the last quarter and now totals over $6,601. Sadly, the vast majority of this growth is in subprime categories where interest rates and fees can be even higher.
Credit card debt is serious, but it does not have to lead to consumer bankruptcy in London if you catch it early. McLennan and Company Ltd. is here to help with debt consolidation, consumer proposals and consumer bankruptcy advice. Contact us today to schedule a free consultation.
What is Credit Card Debt?
Nearly half of Canadians have credit card debt, but too many of use don’t understand what credit card debt is and why it is so bad for our financial health and well being.
A credit card is defined as a payment card issued to users as a method of payment for goods and services. The issuer, usually a bank, creates a revolving account and grants a line of credit to the cardholder, from which the cardholder can borrow money for payment or cash advance. Unlike a charge card, a credit does not need to be paid off every month and users can accumulate significant debt through credit card use.
Concerns About Credit Card Use and Debt
One commonly used strategy in financial planning is the cash diet, which requires the client stick to a strict financial diet of a specific amount and pay all expenses in cash. This allows the client to feel the money in his or her hands and feel it leaving your hands and your miscellaneous and fixed expenses rack up. The reason this strategy is so effective is because one main issue with money is that consumers have no sense that they are spending it. Increased card use has divorced us from the reality that each swipe can be very costly.
Bad Spending Habits
This brings us to the first problem with credit cards, they can create very bad financial habits. When used properly and paid off each month, credit cards can be a valued financial tool. However, too often too many consumers do not pay off their credit card balance monthly. When you treat credit cards like a magical well of never-ending cash, you can get into serious financial difficulty.
High interest and fees
While credit cards make spending too easy and divorce consumers from the reality that each purchase they make truly costs money, credit cards also impose a real financial penalty. Credit card debt is unsecured, making it far riskier than mortgage debt or car loans. Because of this, banks charge high fees and even higher interest rates to account for this risk.
As is clear from this blogpost, credit card debt is serious, but it does not have to lead to consumer bankruptcy in London if you catch it early. McLennan and Company Ltd. is here to help with debt consolidation, consumer proposals and consumer bankruptcy advice.
At McLennan & Company Ltd. we focus our work on helping individuals and families who want to start over financially. Contact our head office in London, Ontario at 519-433-4728 or fill out our online form and someone will contact you within one business day to schedule a consultation.
We know that this is a difficult time for you and your family and we offer free initial consultations. For your convenience, in addition to our office in London, we also have satellite offices in Ingersoll and Woodstock and offer flexible appointment times.