How Long Will It Take To Pay Off My Credit Card?

Paying debt with debt? I know it doesn’t sound that great. But, it actually does make sense (most of the time).  Like most Canadians we all have some form of debt, if it’s a mortgage, a new car loan, a line of credit you used for a recent basement reno, or that very trustworthy, and handy visa card.  Recently TransUnion released their quarterly analysis of Canadian credit trends. They found that the total debt per consumer (excluding mortgage) across Canada increased to $25,709 in the fourth quarter of 2010, up 2.2 percent from the third quarter of 2010 ($25,163). They did indicate that historically total debt does rise in the fourth quarter due to the wonderful holiday shopping season.  However, they did find that credit card debt actually declined nearly 3 percent during this period. But, lines of credit, revolving loans and installment loans all showed increases.

What this maybe saying is that Canadians are becoming smarter with their debt. They are researching lower rate bank products, cutting up high interest retail credit cards, and just taking a closer look (or having more interest in), at where their money is going.

Consolidating debt continues to be the second chance many are looking for. Refinancing your home still proves to be one of the most efficient ways of clearing your high interest debt, and “starting over” with a clean slate.  In many cases it makes sense to pay an interest penalty to break your existing mortgage, payout all, or most of your 18% or higher interest rate debt, and get into a new mortgage with rates as low as 2.25%. This option is not for everyone, and depends on the amount of your penalty payout, your mortgage renewal date, and a few other variables.

Take a look at this calculator from Moneyville.ca titled: How Long Will It Take To Pay Off My Credit Card? It can be a bit depressing to see that a $5,000 balance could take 12.5 years to payoff. But it does make you start to search for a better more efficient financial solution.

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