Credit Card Traps

	Credit Card Traps - Money Problems Radio Show (Opens in a new window. Optimized for Windows Media Player 6.4 and later versions.)
Originally aired on January 28, 2006.

Show Topic:

According to the Canadian Banker's Association, there are over 54 million credit cards in circulation in Canada, which is astounding when you consider that there are only about 30 million people living in Canada, and millions of them are children who hopefully don't have any credit cards. Over $170 billion is charged to credit cards in Canada every year.

With that number of credit cards out there, and with Canadians spending that much using our credit cards each year, it's no wonder that some people get into trouble with credit cards.

On today's show we discuss credit card traps, how to avoid them, and what to do if you have already fallen victim to the credit card trap.

Guests:

Douglas Hoyes and Ted Michalos are the founders of Hoyes, Michalos & Associates Inc, one of Ontario's leading personal insolvency firms. They emphasize a "fresh start" when dealing with money problems. They can be reached at www.hoyes.com or, in Ontario, at 310-PLAN (no area code required).

Show Summary:

Credit cards are very convenient, but that convenience is very expensive if you don't pay them off in full every month. Credit cards are a form of borrowing, so they should really be called debt cards.

Some of the common credit card traps include:

	Credit cards charge interest rates that are typically much higher than the interest charged on a bank loan, car loan or mortgage.
	Taking a cash advance from one credit card to make your payment on another card.
	Only making the minimum payments on your credit cards each month.

For many people the biggest of credit card traps is not knowing how much they owe, and what interest rate they are paying. To avoid the traps, start by determining what you owe. Pay off your highest interest rate cards first (what we call personal budgeting). If you have more credit card debt than you can deal with on your own, consider speaking to a credit counsellor or filing a consumer proposal or , as a last resort, filing for personal bankruptcy.

Credit cards should be a substitute for cash, not a substitute for borrowing, so the average person should not be carrying any more than one or two credit cards.

Question of the Week:

Q. My name is Tom. I got my first credit card when I started college; they were handing them out at the door. Once I graduated I started getting them in the mail; I was always pre-approved. Now I have eight credit cards, and I owe money on all of them, and I'm having trouble making the minimum payments each month. What can I do?

A. The answer will depend on each individual's situation. In general terms:

	First, you should get help. Debt problems will not go away on their own. Talk to your family, trusted friends, co-worker, or a professional to help you through this difficult time.
	A credit counsellor may be able to help you work out a plan to repay your debts.
	If your debts are too large to deal with on your own or through a credit counsellor, you should consult a personal bankruptcy trustee to explain your options, and to help you get a fresh start.

Here are some great links to help you:

	Find a credit counsellor
	Information on how to file a consumer proposal
	Information on personal bankruptcy in Canada