Tips for managing credit and debit

Managing your use of credit

If you have already reviewed the spending habits module, then you may remember learning that people tend to spend more money when using credit than when using cash. Many consumers are even willing to pay more for the same product when using credit instead of cash.

Consider the following points on how to avoid overspending through the use of credit:

  • use your budget and let your financial goals guide your spending decisions;
  • consider your current balance, not your credit limit;
  • remember that you have to pay it back with interest; and,
  • only use your credit card for things you would have purchased anyway (for example, your fixed monthly expenses, which are essential).

Managing your debt

Sometimes, despite your best efforts, you may find yourself taking on more debt than you can handle. The first step in solving your financial problems is to take control before they get out of hand.

Here are some tips for managing your debt post-insolvency:

Setup automatic payments
Consider setting up automatic payments through your bank or credit union. This will allow you to have your bills automatically paid when they are due and when you know you will have the money available in your account.

Use savings to pay off balances
Remember that the purpose of your emergency fund is for unforeseeable periodic expenses. If you find yourself with more debt than you can handle, using your emergency fund may be a solution.

Selling an asset
Consider selling items that also have other costs associated with them. For instance, selling a vehicle will provide money for paying down your debts, and may also cut down on other costs, such as gas and insurance.

Pay the debt with the highest interest rate first
If you carry a balance on your credit card, this is likely the debt with the highest interest rate. Use cash or a debit card for purchases while you are paying your credit card to avoid taking on more debt.

Switch to less expensive credit cards
There are many factors to consider when determining which credit card works best for you. The key considerations when choosing a credit card are the annual interest rate, the fees, and the benefits and rewards. Look around for a credit card with a lower interest rate or fewer fees.

Talk to trusted financial professionals
These may include your bank representative or a financial planner. With their help, you will be able to identify your current debt situation, figure out your needs, make a budget, and pay off the debt.

Remember, credit is a tool and it's neither good nor bad. When credit is used responsibly, it can be very effective for achieving financial goals. However, if it's not used responsibly, there are negative consequences. Remember to be cautious when using credit to reduce your risk of overspending and to avoid future debt troubles!

image of debtor with counsellor

If you have questions, write them down and bring them to your in-person counselling session.