Managing Your Credit Card Usage


Emily sat at her kitchen table, staring at the third credit card bill. It was maxed out, just like the other two. Overwhelmed and angry at herself, panic started to creep in. How did she end up in this situation? She used to pay off her credit card in full every month, but things changed. She got enticed by another card that offered more points for shopping at a specific supermarket. Then, when she planned a trip abroad, she applied for a third card to avoid foreign exchange fees. But her spending got out of control, and now she found herself drowning in debt. Sleepless nights and constant worry had become her new norm.


The Problem

Credit card debt is a widespread problem among Canadians. The ease of obtaining credit cards and our desire for instant gratification can lead us down a dangerous path. In a society that embraces the “You Only Live Once” motto, it’s easy to lose sight of the consequences of excessive credit card usage.


Financial literacy plays a significant role in managing credit cards. Many people are unaware of how interest rates and minimum payments work, and they fail to grasp the impact of carrying a balance. Some even believe that not paying off the balance every month can improve their credit score, unaware of the extra interest they accrue.


Credit Card Payment Calculator

To understand the consequences of credit card usage, the Financial Consumer Agency of Canada offers a Credit Card Payment Calculator. By entering your credit card balance and interest rate, you can explore different payment options. For example, if you owe $1,000 with a 20% interest rate, paying only the minimum due would take ten years and eleven months, costing you $990.60 in interest. This calculator serves as a valuable tool for anyone with a credit card or planning to get one.



Pressure to maintain a certain lifestyle also contributes to credit card debt. Social media and advertising bombard us with images of exotic vacations and the latest hi-tech tools, tempting us to finance these desires with credit cards. The short-term appeal often overshadows the long-term financial consequences.


Life events can unexpectedly push us into credit card debt. Medical emergencies, job loss, or unforeseen circumstances can quickly deplete our savings and force us to rely on credit cards for essential expenses. Without a safety net or a solid financial plan, we may find ourselves struggling to dig out of spiraling debt.


A Way Forward

Transfer Your Credit Card Balance

Consider consolidating your credit card balances onto a card with a lower interest rate. Some credit cards offer promotional periods with 0% interest on balance transfers. However, be cautious and read the terms and conditions carefully, as there may be balance transfer fees or higher interest rates after the promotional period ends. Use this option as a temporary solution and focus on paying off the balance as quickly as possible.


A Consolidation Loan

Another approach is to explore installment loans, also known as consolidation loans. These loans provide a fixed repayment plan with a clear end date. By obtaining such a loan, you can pay off your credit card debt in full and eliminate the temptation to accumulate more debt. However, it is essential to exercise caution and ensure that you don’t fall back into the habit of relying on credit cards once the loan is paid off.


Taking control of credit card debt requires discipline, knowledge, and careful planning. Paying only the minimum, requesting credit limit increases, or getting another credit card are not solutions. Start by assessing the full extent of your debt and developing a realistic repayment plan. Transferring balances to a lower-interest credit card or obtaining an installment loan can provide temporary relief, but you may need to cut up your credit cards to prevent your spending from getting out of control once more.


Track Your Spending

Creating a budget is often considered essential but is also viewed as intimidating by many. I suggest you start by tracking your income and expenses to identify areas where you can cut back. Review your subscriptions and cancel those you no longer use. Trim back your spending by identifying expenses that are costing more than you realized. Redirecting freed-up funds towards paying off your debt will probably require adjustments to your lifestyle, but it will lead to long-term financial freedom.


Build an Emergency Fund

Building an emergency fund is also vital for responsible credit card usage. Set aside a portion of your income each month into a separate savings account. Aim for a minimum of three months of living expenses. This fund will act as a safety net in case of unexpected expenses or financial emergencies, reducing the need to rely on credit cards to cover such costs.


Seek Professional Help

If you do not have an emergency fund, or an insufficient one, if lower-rate credit cards, consolidation loans, and tracking your spending don’t offer a viable solution, seeking professional guidance is recommended. Credit counselling agencies can provide helpful advice, while licensed insolvency trustees can recommend options like consumer proposals or bankruptcy, if necessary.


Sometimes our behaviour with credit cards is rooted in issues far deeper than YOLO slogans. A lot of our behaviour, financial or otherwise, is found hidden deep within our childhood experiences. A psychologist and financial planner, Brad Klontz, has developed a couple of questionnaires that may help you to discover if there are issues that need more attention. Find out what your unconscious beliefs about money, called Money Scripts®, are here. Klontz has also developed a Money Disorder Assessment that may be of interest to some. Note that for both of these items, the results are delivered by email (check your junk mail folder!) and require you to enter some information about yourself. As long as you do not indicate a desire to be contacted, you don’t need to worry about being inundated with spam. Finally, an organization that is U.S.-based but has at least a couple of members in Canada is the Financial Therapy Association. If you want to engage with a member, you can go here and use the menu on the left to select the area that you feel most concerned about.


Regain Control

Preventing future credit card debt involves re-evaluating the purpose of your credit cards. Instead of seeing them as sources of excessive spending, view them as tools of convenience and credit-building instruments. Educating yourself about personal finance, understanding interest rates and credit scores, and building an emergency fund are essential for responsible credit card usage.


Consider the consequences of not taking control of your credit card debt. Excessive debt can hinder your goals and dreams. It can make it difficult to qualify for a mortgage or obtain financing for other major purchases like a car. By taking control of your credit cards, you pave the way for a brighter financial future.


This is the 197th blog post for Russ Writes, first published on 2023-05-15


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Disclaimer: This blog post is intended for general information and discussion purposes only. It should not be relied upon for investment, insurance, tax, or legal decisions.


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