Ultimate Guide to Credit Card Debt Relief in Canada

Paying off credit card debt can feel like a never ending journey, especially with high interest rates, bad payment habits, or the inability to make payments on time. The cycle of debt accumulation is a huge problem for many Canadians, with nearly half of them finding it stressful to pay off non-mortgage debts.

First Steps Towards Managing Your Credit Card Debt

Taking action to address your credit card debt is crucial to avoid further financial stress. Common traps include ignoring the problem altogether or trying to wait until your situation changes. These are not ideal strategies for addressing your debt– action is of the utmost importance.

Here are a few quick steps you can take to get started:

• The first step is understanding. Start by collecting as much information as you can: total debt, interest rates, number of debtors, due dates, income, expenses, etc.
• Set a monthly reminder to go over this information, along with your credit report, and monthly budget. Consistency is key, so put this in your calendar as soon as possible.
• Create a detailed action plan, including deciding which debts to address first and determining how long it will take to pay them off.
• Create a budget that outlines your monthly expenses, income, and how much you will be able to contribute towards your debts.

Debt Consolidation For Credit Card Debt Relief

Good financial habits, literacy, and rebuilding your credit are key elements of relieving your credit card debt. However, if you’re stuck in a vicious cycle of debt and simply can’t pay down your high-interest debts, it may be necessary to take other steps. One option is debt consolidation.

Debt consolidation involves combining multiple high-interest debts into one loan with a lower interest rate. This can make debt repayment more manageable and potentially save you money on interest charges. 

When considering debt consolidation options, it's important to carefully assess the terms, interest rates, and fees involved to ensure it aligns with your financial goals and needs. Watch out for hidden fees, and keep an eye out for other features that could add value.

You can take our debt consolidation quiz to get a better understanding about this option and how it applies to your general situation.

Is Bankruptcy An Option For Credit Card Debt Relief?

The long-term consequences of bankruptcy make it unlikely to be a good solution for credit card debt relief.

Bankruptcy is a legal process that is considered a last resort, although sometimes looked to as a source of relief for overwhelming debts. When it comes to credit card debt, bankruptcy would allow for the discharge of the debt, and trigger an automatic stay, which stops collection actions, wage garnishments, and harassment by creditors.

However, the downsides include a long-lasting effect on your credit, potential loss of assets, and a big impact on your future finances. These effects make it an option that should be considered only in dire circumstances.

Conclusion

Navigating credit card debt in Canada is a process that requires a tailored approach based on your financial circumstances. Everyone’s situation is different, but Parachute strongly believes that the root cause must be addressed. Paying off your credit card debt will require consistent maintenance and work. 

Building positive habits is necessary, and our platform is addressing the behavioural change necessary to make it happen. You can learn more about our work here.

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