If there’s one good thing to come out of this pandemic, and there hasn't been a lot, it’s the 60% decrease in credit card spending in Canada. More than half of all Canadians are carrying credit card debt, so keeping this lower spending habit going will help them pay it off sooner.
Although convenient, credit cards make it really easy to overspend. An MIT study found that people were willing to spend up to 100% more using a credit card instead of cash. How’s that possible? It’s just how credit cards can trick your mind.
When you pay with a credit card, you may feel fine in the moment because you haven’t actually paid with your own money. Experts explain that this delay in payment leads to a detachment that makes a purchase feel less painful psychologically. The real heartbreak hits you when your credit card bill arrives. What’s worse, once you get that bill it’s too late to realize you’ve spent money you don’t have and many people end up carrying a credit card balance...
The #1 financial goal of Canadians 9 years in a row has been to get out of debt. If you’re currently carrying credit card debt or any other high interest rate debt, make it a top priority to pay these off. The quicker you pay them off, the quicker you can start saving and investing towards your long term life goals. If you have multiple debts, consider following the Avalanche Method by focusing on paying off the debt with the highest interest rate first.
Now that you know what credit cards can do, as you’re paying down your balances, start moving away from using credit cards to speed up your progress to being debt-free. Try using your own money with a prepaid card or debit card for better control. By taking some time to create a budget, you could also help accelerate your progress. Remember, it’s all about taking small steps towards healthier financial habits.
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