What if I can’t pay my credit card?
If you’re struggling to pay your credit card bills due to the impact of COVID-19, there are options available that may provide relief.
Trying to get by has become much harder for millions of Canadians because of the COVID-19 pandemic. Thousands are out of work and we are all worried about what the future holds for us. In particular, many people are facing debt problems because of employment disruptions: Some of us simply can’t pay our bills.
The Government of Canada and Canada’s leading banks are working together to provide concrete relief to Canadians. Ruth Mercer, Senior Manager, Credit Restructure, at TD, and Tannis Dawson, a High Net Worth Planner with TD Wealth, discuss some of the options currently available to Canadians as well as ideas on how to get bills under control.
Depending on the situation, an individual or family may be eligible for a temporary deferral of interest on TD credit cards or a temporary deferral of payments on a TD loan. A person may also be eligible for a mortgage payment deferral.
Here are the details: The program is limited to TD products and services and is for TD customers who wouldn’t ordinarily qualify for other credit programs. The program is offered on a case-by-case basis to each person or family and can provide much-needed relief if finances are temporarily squeezed. It should be noted however that a pause in payments or interest will not eliminate the debt itself. TD clients can find more information here on what COVID-19 relief offers may be available.
Ruth Mercer says that this relief program is an expansion of TD ‘s current credit restructuring programs. The relief options were expanded to help those impacted by the COVID-19 disturbance. She says that the program’s staff can look at a family’s mortgage, credit card obligations and TD loans to see which way is best to bring relief and alleviate fears around financial worries. Mercer says the bank can also help people consolidate their TD services into one loan to make repayment more manageable.
“We free up their cash flow so they can manage things easier,” she says.
Debt consolidation and prioritization
For those who may not be in an emergency situation, Tannis Dawson suggests one way to control credit card debt is by prioritizing debts that have the highest interest rates and consolidating them under a lower-interest loan. For instance, she says, a Home Equity Line of Credit (HELOC) could be used to pay off your credit card. The interest rate on a secured line of credit is typically much lower than the interest rate on a credit card and may help to lower the amount of your payments. For those who don’t own a home, other lending solutions may be available.
Other options to consider
Getting into debt may happen when we are faced with unexpected bills or when we live beyond our means, says Dawson. Getting out of debt may mean looking hard at cash coming in and out of the household, and planning and budgeting so that you can keep ahead of bills. If you don’t have access to low-interest credit but you do have some funds left over after paying the bills, you may be able to use that to make your payments. Likewise, if you have funds set aside in a Tax-Free Savings Account (TFSA). Depending on your situation, Dawson suggests that one way to deal with debt is to sell an investment within the TFSA and withdraw the funds if it makes overall sense. This is an efficient way to pay down outstanding debt because there are no tax implications on withdrawals from a TFSA and contribution room remains the same and can never be lost.
If you’re facing an upcoming payment on your credit card and don’t think you’ll be able to make it, reach out to your financial provider to find out what options may be available. TD clients can also find more information here. Mercer says that some customers that her staff have spoken with have been appreciative of the support they’ve received.
“It’s great to hear back such heart-felt gratitude from customers who think they are desperate. Many are scared they are going to lose their homes and they tell my staff, ‘you saved our lives.’ It gives you a warm and fuzzy feeling.”