not paying my credit card debt

We’re entering the time of year in Canada when people tend to complain about having the “winter blues”. The sky is grey, the air is cold, and many are still struggling with holiday credit card debt.

According to a 2017 report, Canadians carried an average credit card debt of $3,904. On its own, the number doesn’t seem overwhelming, but compound interest on a balance carried forward on a credit card can inflate the total until it becomes virtually unmanageable.

In other words, if credit card debt gets ahead of you, it tends to stay ahead of you unless you take serious, progressive action to turn your debt situation around. Although credit card companies are known for aggressively pursuing debt, help is out there for people who want to make an honest effort to pay their outstanding balances.

When Your Credit Card Debt is in Default

We’re human. When life gets busy, sometimes things get forgotten. Maybe you missed your credit card payment due date by accident. Or maybe you simply couldn’t afford the payment this month due to sudden, unforeseen circumstances such as illness, job loss, or a family emergency.

Whatever the circumstances, you’re still obligated to pay your credit card debt. If you don’t, your bank could action to recover the money. These actions are usually detailed in the credit card agreement you signed or accepted online, but typically, they could include any combination of the below:

  • Increased interest rate: Your introductory interest rate, which was relatively reasonable, could more than double if you miss even a single payment, causing your balance to skyrocket
  • Card suspension: Your bank may suspend or even cancel your credit card until your debt is paid in part or in full
  • Automatic withdrawals: If you have a savings or chequing account with the bank that issued your credit card, they may be able to take money from your accounts to cover the outstanding debt
  • Credit bureau alert: The card issuer might alert the credit bureaus of the situation, making it much harder and/or more expensive to qualify for student loans, automotive loans, mortgages, and other credit in the future
  • In-house collections: After your debt is 30-days old, the bank’s in-house collection department will contact you to follow up on payment, at which point you should start negotiating a repayment plan with them
  • Collection agency contact: At the 180 day mark of your debt not being paid, your account may be turned over to a collections agency, which will follow up for payment with you through telephone calls and letters

High credit card debt can lead to other financial problems as well. If you can’t use your card, you may be tempted to cover expenses through credit lines, personal loans, or other credit cards that will inevitably raise your debt level so high that you may never catch up.

Fortunately, there are solutions that can help you get you back on track to debt recovery, rebuild your credit rating, and gain access to credit again.

Credit Card Debt Relief

Facing your debts may be difficult, but it’s honestly the best thing you can do. Avoiding credit card payments or ignoring collections contact will make the problem worse, so it’s best to take control of it sooner rather than later

The good news is that you don’t have to face your debt problems alone. If you need credit card debt relief, licensed insolvency trustees can recommend solutions that will bring you out of debt and get you on the road to financial recovery:

A good licensed insolvency trustee will make sure you understand every solution available to you, including the credit implications involved, and can even help you develop a strategy that will keep you out of debt.

Credit Counselling to Avoid Credit Card Debt

Once you get out of debt, you’ll never want to go back, especially if your creditors are actively pursuing you through calls, letters, or even the courts. But if you think that falling into debt again is a possibility, a credit management program, or credit counselling, might help.

Credit management programs include an analysis of your income and expenses, a monthly budget, and an affordable payment plan for your debts. You might even find yourself spending less money and keeping more in your pocket for emergencies and long-term financial goals.

Remember, there’s no shame in asking for help with debt or credit management. As always, I’m here to listen and answer any questions.

Robert Charles, B.A., CIRP, Licensed Insolvency Trustee, is the founder of Charles Advisory Services.

For every debt problem, there’s a debt solution. Since 2006, Licensed Insolvency Trustee Robert Charles and his team at Charles Advisory Services have helped individuals, families, and businesses in Toronto move beyond debt towards financial health. Contact us today for a free consultation.

TIP: The best way to avoid credit card debt is to not use credit cards at all. Paying for everything with cash will keep you under your budget, provide valuable insight on actual cash flow, and keep you out of debt over the long term. Debit cards won’t put you into debt either, but be careful to stay out of overdraft.