As a result of new Canadian legislation, credit card companies must show the amount of time it will take to repay the amount owing on the credit card if only the minimum payment is made. It is calculated on the current balance.

I was absolutely shocked when I searched for the information on our most recent bill and saw the answer in print. By their calculations, it would take us 43 YEARS and 11 MONTHS to repay $3800 at the rate of the minimum payment each month. At that rate, the original purchases would cost more than 10 times the original sticker price. Keep in mind, we pay our balance in full each month so this was an academic exercise.

I know you all know this…..but this is a very loud wake-up call for any of you carrying this type of debt without repaying the amount in full each month. A few tips:

• Pay the entire balance owing each month.
• Make sure you pay by the date shown on the statement.*
• If you can not afford to pay for the item when the bill comes, do not buy it on credit.
• Repay any unpaid balance as soon as possible.
• Make choices around your monthly spending to repay any residual amount owing right away. Consider finding another income source to help to reduce the debt faster.

*Credit card companies measure whether your payment is received on time based on when your payments are received. If they are made within the billing cycle, the payment is considered on-time. It doesn’t matter if you pay more than required or more frequently if the payment is outside the required due date. Making even the minimum payment by the due date keeps your account in good standing.

The benefits include:

• A favourable credit rating that does you in good stead should you need to borrow money.
• The items purchased on the card will cost you an amount in excess of the sticker price (the interest cost adds up quickly) but the sooner you repay it, the less interest you will pay.
• A clear card if you need it in an emergency.

Not a new topic but this new piece of information on your statement is an eye-opener!