CANADIANCREDITCARDHOLDERSLOOKING TOCOOLDOWNOVERHEATEDDEBT
The average Canadian who doesn’t pay off their credit card balance each month carries a whopping $7,522 in credit card debt. That’s good news for credit card companies. But it’s not so good for cardholders, who often make minimum monthly payments on high-interest loans that at that rate might be paid off some time beyond the middle of the 21st century.
“Our culture has ingrained in us the message that a credit card means you’re an adult and you’ve arrived — you’ve ‘made it,’” says Tanya Romanuk, Mogo Card product manager with fintech leader Mogo Finance Technology Inc., acompany positioning itself to provide services to customers 35 and under. “In many cases, our parents didn’t set the best examples. In the ’80s and ’90s, it was all about which card you had or how many cards you could pull out of your wallet.”
Banks also encourage customers to apply for credit cards, often as soon as they become postsecondary school students. That can be a recipe for financial disaster, says Mogo’s financial fitness coach Chantel Chapman, as cardholders build high debt levels, incur over-limit fees and often pay only the minimum monthly balance.
“Having access to borrowed funds any time of day or night through a convenient little piece of plastic is not only risky, but also often detrimental to our financial lives,” she says.
Chapman has some good advice for consumers KO’ ed by credit: • Make convenient credit cards inconvenient by leaving them at home and short-circuiting impulse purchases. • Switch to a prepaid credit card like the Mogo Prepaid Visa, which provides the functionality of a credit card, while ensuring cardholders spend only money they actually have. • Have an exit strategy. If you carry a balance, pay it off with a personal loan that doesn’ t allow you to reborrow after each payment is made like a credit card.
“That’s one area where Mogo can help people drowning in credit card debt,” says Romanuk. “We can offer a personal loan at a much lower interest rate than what the credit card companies are charging to pay offthe credit card debt, while offering a realistic plan for paying off that loan in five years or less. Youcan apply for a loan online.
While Mogo counsels customers about the healthy use of credit cards, it won’t demonize credit, she says.
“Credit cards provide a great service when used appropriately,” says Romanuk. “We want to help them to consolidate card debt, not stand over them while they cut up their credit cards. They understand the drill.
“As millennials, many of our members lived through the tragedy their parents experienced during the global financial crisis. They want to know they’ re doing the smart thing with their finances so they never get caught in that situation. They want to be sure if they’re ever laid off due to a market downturn they can support themselves and won’t have a massive debt burden to pay down.”
She admits that offering low-interest loans to pay off a high-interest credit card doesn’t conform to a typical financial services business model.
“We want to help our members to use our level up program which rewards you for on-time payments and lowers your interest rate over time and budget well so they can love using our products, not need to use our products,” says Romanuk. “Financial products should make your life better. They don’t need to be a drain on a person’s resources.”
Beginning March 21, Mogo is offering to make one lucky person’s life better by giving away $7,522 — enough to eliminate the credit card debt of the average Canadian who doesn’ t pay off their balance monthly and give them a fresh start. Learn more at: www.mogo.ca