Your clients know the benefits of using credit cards, but what about their pitfalls?
With so many Canadians on the hook for the debt, remind them of the dangers of racking up consumer debt and ignoring payment obligations.
Read: Canadians in denial on lasting debt
A recent TD poll called Credit Cards and You finds people between the ages of 18 and 34 are busy taking advantage of the benefits of using their cards. They’re earning points towards travel or other purchases (60%), building their credit rating (59%), tracking spending (36%) or managing cash flow (28%).
But, they are also being careless when it comes to paying bills. The poll finds the following:
- Over half (51%) aren’t paying their credit card balance in full at the end of the month
- Some are only making the minimum monthly payment (40%)
- Others are missing monthly payments (23%)
- 18% are using their credit card to supplement their income
- Worst of all, 14% are routinely maxing out one credit card and using another as backup
“Credit shouldn’t be used as a means for perpetual, permanent borrowing,” says Stephen Menon, associate vice president, credit cards, TD Canada Trust.
Read: Discuss overspending with retired-clients
To help your clients kick these habits, suggest they brush up on the costs of borrowing. A $2,000 card balance, at a 19.99% interest rate, would take more than seven years to pay off if they only contributed the minimum payment. They’d end up paying over $4,000 due to interest.
Also, propose they set up a pre-authorized credit payment to make sure minimum or full balances are met every month.