Consumers will need to make an extra effort to pay the minimum balance of their credit cards that can reach 5% within six years.
Explanations and reactions
First, these provisions of the Consumer Protection Act will come into effect on August 1st. As of this date, holders of a new credit card will be required to pay 5% of the balance. However, this does not apply to current credit card holders.
In fact, this leaves a 5-year period, until 2025 as a period of adjustment. In August 2020, for example, the minimum balance to be paid will be 2.5%.
What are the main consequences of these new measures? Is the number of bankruptcies likely to be rising? “It’s hard to say, but in the short term, it’s positive because it makes people who need to pay their credit cards faster,”
He suggests starting now to make the habit of paying 5% of the minimum amount of his credit card balance. “It makes a big difference on the time and the interest to pay. ”
65 years old for a trip
Consumer Protection Board spokesman Good Lender also believes this leaves a lot of room for people. In an interview with several media including the author of these lines, he gives as an example a trip of $ 5,000 bought by a credit card at 19.9%. “If we only pay back 2% of the balance, it will take 65 years to pay it. The person will have paid $ 22,415 in interest charges, “he says.
In return, paying 5% minimum fee, this trip will be paid in 13 years. Credit interest charges will be $ 3,349.
“Currently, there are many problems of insolvency due to access to many credit cards and too high limits,” said Good Lender.
Back to the 90s
Director of the Consumers Union of Quebec, France Latreille explains that during the 90s, consumers already paid 5% in minimum charge of the balance of their credit card. “Then, financial institutions started to reduce this minimum amount by up to 2% today,” she says. As a result, this has had a significant impact on indebtedness.
Solicited at the end of high school, young people have access to more than one credit card. Buying now and paying later has become almost the dogma of a company eager to consume an electronic toy or a trip to the other end of the world.
Result? Young people aged 20 to 25 sometimes have accumulated debts of more than $ 60,000 on 5 to 6 credit cards, including those of department stores whose interest rate is around 30%. Seniors, on the other hand, are also struggling with unparalleled debt.
ABC recommends making her budget. “We try to predict expenses such as back to school, Christmas, summer vacation, travel,” she says.
As much as possible, we keep a cushion to plan for unforeseen things like a fridge, a water heater, a car that breaks down.
This summer, we are trying to get our head out of the water of debt by taking a look at tools that will help us to see clearly.