How to Reduce and Eliminate Credit Card Use

2020-03-13   minute read

Linda Paul

Debt Solutions

Accessing and using credit is easier than ever. And that’s certainly convenient for some. But for others it means accumulating balances and interest charges faster than they anticipate — or can manage.

Person in front of a laptop on their cellphone holding a credit card

Do you feel regret, anxiety or panic arise when you see your debt balances growing, rather than shrinking? You’re not alone. If you’re tired of revolving cycle of debt and remorse, you could be ready to reduce, and potentially eliminate, the use of credit cards for good.

But remember, your credit card debt did not happen overnight. It will take a lot of time and focused effort to pay your balances down. Pairing a realistic plan and a lot of patience is the best way to make your debt management dream a reality.

Following is an effective, straightforward two-stage strategy you can begin using right away.  

Stage 1: Pay Down Credit Card Balances

First things first, you need to get your credit cards back to a point where they no longer feel so overwhelming. But there is more you can do beyond just making your payments on time and in full.

You can also:

Stop using your credit cards.

If your plan is to eliminate your credit card debt, the worst thing you can do is work against yourself. Commit to not using your credit cards while you’re paying them off. This might require something as simple as locking them on your online banking app, or as extreme as freezing them into a block of ice.

Request lower interest rates.

Your card provider may be willing to reduce your current interest rate over a negotiated timeframe, or help you switch to a new card option with a permanently lower interest rate. You just have to ask.

Even better, see if they’re offering any low or zero interest balance transfer offers. Even six months without paying interest will be a massive help in your debt reduction plan.

Just beware of any service fees or penalties for missed payments — and be sure to pay back as much as you can over the interest-free grace period to avoid large, unmanageable payments later.

Pay it off as fast as possible.

Work backwards to create a realistic pay off schedule that eliminates as much of your balance(s) as possible before your reduced interest rate expires. A budget is super helpful here, as it will help you understand how much disposable income you have and prevent any shortfalls that may cause you to continue using credit.

Lower your limits.

Consider reducing your credit card limits as you pay down the balances. This will ensure you avoid working against yourself by unwittingly reusing any available credit you’re creating.

With that said, don’t do this until your balances are well below the existing limit. You could damage your credit rating if your balances are more than half your available limit.

Eliminate your cards one by one.

Once you’ve paid your cards off, you have a choice to make: You can keep the cards at low limits and pay new transactions off each month. Or, if you believe its likely you’ll reaccumulate debt, you can cancel the cards altogether.

Do some research first to find out how this may affect your credit score. For instance, it’s better to keep the credit accounts you’ve had the longest — especially if you have a good history. Cancelling a more recently obtained card likely won’t impact your credit as severely.

Stage 2: Reduce and Eliminate Credit Card Use

Once you reduce your balances and limits, it’s time to decide how you’re going to manage future credit card spending.

Budget all credit card spending

Set aside a designated amount for monthly credit card spending and stick to it. Keep a record of any transactions or subscriptions which charge to your credit cards and transfer those funds to the card before your monthly statement arrives.

For regular purchases or transactions, get into the habit of transferring money directly from your chequing account onto your credit card immediately after the purchase. If you cannot afford to pay for the item in cash, you cannot afford to pay for it on credit.

Increase your savings

Not all your expenses are predictable from month to month. Things like your membership to a certain warehouse store, oil changes for your vehicle and even pet food might sneak up on you quarterly — even yearly — and that makes them easy to forget about.

And when they don’t make it into your budget, out comes the credit card!

The solution is to prepare. Create an itemized list of annual, semi-annual or quarterly expenses. Add them up and divide by twelve. Set this aside in a separate account every month. When one of the items comes up on your list, use these funds rather than a credit card.

Can You Stop Using Credit?

It’s a challenge to forego credit in today’s world. But certainly not impossible. Changing your behaviour will take time, but thankfully there are options available to help you on that journey.

  • Prepaid credit cards operate just like regular credit cards and allow you to keep your subscriptions, shop online and book reservations
  • Visa-debit cards function in much the same way, but pull funds directly from your chequing account
  • Secured credit cards allow you to put a cash deposit down which functions as your credit limit, ensuring you’ll never take on more debt than you can handle — with the added benefit of growing your credit rating at the same time.

No matter which strategy you choose, be realistic and know that it will take time to stop using your credit cards as much. If you start implementing the strategies above to reduce and eliminate credit card use, you’ll be well on your way.

Life-Changing Debt Solutions

If you’ve tried all the steps above and you’re still struggling to manage your credit card debt, there are options to get the lasting relief you need. Reach out to a Licensed Insolvency Trustee for a no obligation Free Confidential Consultation today to see which one would work best for you.

During this initial meeting you will review your financial history, discuss your challenges and goals and uncover opportunities to defeat your debt for good. If you qualify for a Life-Changing Debt Solution such as Bankruptcy or a Consumer Proposal, you may be able to become debt free in as little as nine months. Licensed Insolvency Trustees can also help you connect with other financial and wellness resources to ensure you get the best advice and all the help you need to succeed on your journey to become debt free.

No matter the challenges you’re facing, there’s always a solution. Stop struggling with your debt in silence. Call today and get the help you need and the outcome you deserve. 

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