How to Avoid Debt and Pay Off Your Credit Card Bill in a Month
We’ve been there. Large or unexpected purchases come up, and you charge your credit card to deal with the payments later. Suddenly, you’re stuck in credit card debt with no way to pay it off.
You’re not alone. High inflation rates are causing consumer debt to rise. The average debt for Canadians is $21,000 (excluding mortgages), which is an 8.2% increase from last year.
That can be an intimidating amount of debt, so let’s start small. Start by paying your full credit card bills so you’re not adding to your debt. Then, you can start chipping away at your debt.
How Lawrence Paid Off His Credit Card Bill
Lawrence had some unexpected car repairs last month and maxed out his credit card. His credit card balance is sitting at $2500. So, he needs a way to pay it off to avoid going into debt.
Lawrence has four weeks until his credit card payment is due. He decides that he can’t pay off the whole amount this month. So, he sets a goal to pay at least a half of his bill, which is $1250.
Lawrence has a full-time job as a Construction Labourer at $22/hour. His monthly take-home pay (minus taxes) is $2860. Most of these pay cheques go to his monthly living expenses. See his budget on the left.
He has an extra $360 that he can contribute to his credit card bill. On top of that, he figures that he can cut down $150 on eating out and entertainment costs. The remaining amount in his goal is $740.
He decides to look for a side job to cover the rest of the expenses. He estimates he can work an extra 12 hours per week by looking at his schedule. He plans to spend four hours after his day job, three days a week. Then, he’ll still have weekends off. This is an amount he’s comfortable working without burning himself out.
Lawrence starts his job search. He sees a posting with AmbiMi for Construction General Labour at $24/hour. He gets in touch with our team and starts the next day. Our team helps him fill up his schedule with labour gigs. After four weeks, his take-home pay is $864.
Overall, Lawrence paid $1374 off of his credit card bill, exceeding his goal by $124. He continues to do the same for the following month and paid off his entire bill.
How to Avoid Credit Card Debt
To avoid this situation, follow a few tips to ensure you don’t go into credit card debt.
Budget for large purchases
Contribute a part of your earnings to a savings account for large purchases. Then, unlike Lawrence, you’ll be prepared when car repairs or other expenses come up at the last minute.
Automate your credit card payments
Automating your payments ensures you won’t forget to make a payment on time.
Make more than the minimum payment
Although your payment won’t be late when making the minimum payments, interest will accrue on your account. Plus, you’ll be playing catch-up later. Pay as much of your monthly payment as possible, if not the full amount.
Don’t spend more than what you have
Never spend more than what’s in your chequing and savings account when possible. If you are behind one month, it’s easy to fall more and more behind until you can’t make a payment.