Posted On: June 14, 2014

Too often credit cards seem like easy money. Just hand it over to the clerk or type in the card number for your online purchase and, presto!, you have stuff. But you may pay to play. If you don’t take care of  your credit card balance on time, you can get penalized with late fees and bad credit scores.

While most of us know this on some level, it’s worth the reminder.  Canadians continue to fall further and further into debt, with their love of bank loans, car loans, lines of credit and credit cards leading the way. Last month the average Canadian consumer’s total debt rose $225 to $27,355 according to the latest analysis of credit trends by TransUnion.

So here’s five things you should know about the plastic plunderer in your pocket:

1. Don’t Live Without Grace: When buying with a credit card you are basically taking out a loan, which means paying interest. Usually the interest is waived if you pay within a “grace” period. Check to see whether your card’s grace period is 30 days, 20 days or one of the lovely “specialty” cards that has no grace period at all.
2. Minimum Payments Maximum Pain: What’s wrong with just paying the minimum balance cited on your credit card invoice? If you were to figure out how much time and money, in the form of interest payments, you would spend to pay off a balance with minimum payments, you would be staggered.
3. Never Be Late: Not only does missing the deadline for a credit card payment carry a financial penalty, it may bump up your interest rate and damage your credit rating. Ouch!
4. Dangers of Juggling: You might be tempted to transfer your balance to a credit card with a lower interest rate. This could be OK if  you pay off the balance during the period the low rate is offered. If not, check the fine print, because you may wind up paying  a higher rate than before.
5. Doesn’t Advance Your Cause: Doing cash advances with a credit card at an ATM is not a good idea. Not only are you charged a high interest rate there is no grace period. As soon as the money leaves machine, the credit clock is ticking.

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The fear is eating away your stomach lining. You can’t sleep. You can’t concentrate. You feel like a failure in the eyes of the world.

The envelopes of the unopened bills have changed to new ominous colours. The days you could juggle minimum payments between credit cards is coming to an end as you reach your limits. You stop answering the phone calls for fear of bill collectors . . . and then the phone stops working altogether.

Many people come to Toronto Licensed Insolvency Trustees gripped by the worst fear of their lives. They are looking at the end of their world, and who could be complacent in the face of that?

When people arrive at one of our offices for the first time, turning the handle of the front door feels as hard as moving a boulder. What our trustees try to convey at this meeting is that their visitors are not the first to have faced this situation. And while things might be dire, we are no longer a society that sends people to debtor prison. You can take concrete steps to deal with the crisis and begin the trip back to solvency and self-respect.

Of course, not all severe debt problems need to be dealt with by bankruptcy. But let’s assume you must face the worst. Does it mean that your world is over? No, absolutely not. While we cannot wave a magic wand and make everything go away, we can help you manage the process so that the road to recovery is seen clearly and followed sooner.

People ask if they will lose everything they have. No. Contrary to popular belief, you don’t lose all your assets when you go bankrupt. While there might be some things you have to give up, you will probably get to keep your furniture, personal effects, car and business tools.

What will stop the lawsuits and wage garnishees? some ask. A bankruptcy immediately stops anyone from suing or garnisheeing you, even the CRA. Only Family Responsibility Office Garnishees aren’t stopped.

Will my spouse and their property be affected by my bankruptcy? Probably not, except perhaps indirectly.

The above only touches on some of the issues a first free assessment covers. To get a full appraisal you need to come in and move the boulder on our front door. We guarantee that the knob will be a lot easier to turn on the way out.