Managing your Debt

Debt management is a tough subject. Luckily, there are some great resources to help. Take a look at the links below to find a helpful calculator, as well as some tips on dealing with debt and how to use credit wisely.


Tools

If you have a credit card and are only making the minimum payments each month, you might be surprised to know what those minimum payments are actually costing you. Check out this Minimum Debt Payment Calculator to find out.

Use the Credit Card Selector Tool to help you select a credit card that best suits your needs.


Forms

Credit History Request Form (Equifax)

Credit History Request Form (Trans Union)


Additional Resources

A video clip of Suze Orman’s: Why do We Need Credit Cards?

Tips for Using Credit Wisely from the Canadian Bankers Association.

See Canada’s Office of Consumer Affairs webpage Taking Charge of your Debts

Office of the Superintendant of Bankruptcy’s Dealing with Debt: A Consumer’s Guide

For additional information, check the Financial Consumer Agency of Canada webpage Credit, Loans and Debt.


FAQ 

I find my credit card so convenient! If I can make my minimum payments, why should I stop?

Would you ever take out a high-interest bank loan to buy a new pair of shoes? That may sound silly, but paying for items with a credit card is really the same as taking out a bank loan if you can only make the minimum monthly payment. If you don’t pay the balance of your credit cards in full each month, you will be charged interest. Interest adds up quickly, and you can end up paying much more than the original cost of the item.

Here is an example: Say you feel like treating your new baby to a fancy new wardrobe. You decide to spend $1000 on brand name baby apparel. If you pay with a credit card that charges 18% interest (which is not that high for credit cards), and your minimum payment will probably be around $30 a month. At that rate, it will take you 47 months to pay the full balance on your credit card. You may think that $30 a month for 47 months is not so bad for how cute your baby will look in denim—you might even think that’s better than paying $1000 up front—but think again! If you do the math, you end up paying an extra $410 in interest, which is 41% extra on the cost of the clothes. That’s a lot of money! Your total interest payments will be in the hundreds of dollars—which means you’ll be paying in interest what you could have spent on your baby’s wardrobe.

Is all debt bad?

This may come as a surprise, but not all debt is considered bad. There are types of healthy debt. A good example of healthy debt is a mortgage for which you are able to comfortably make the monthly or bi-weekly payments. This is considered healthy debt because it is an investment; it creates value.

Bad debt happens when you use credit to make purchases that don’t increase in value over time. For example, if you purchase clothes using a credit card and don’t pay off the balance in full when it is due, you’ve created a bad debt situation. As was mentioned above, you end up paying a lot more for what you purchase on credit if all you can afford are the monthly payments on your credit card. If you can’t afford even the monthly payments on your credit card, your credit score will decrease, making future borrowing more difficult and more expensive. That situation increases stress, and makes affording even the basic necessities difficult. So, it’s in your best interest to not get in the habit of only making the monthly payment. Jump on debt early, and if you can’t always pay back what you borrowed on time, make sure you make more than the minimum payment. You’ll be glad you did!