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Dealing with Your Finances during a COVID-19 Crisis

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Handling personal finances during a pandemic can be a challenge, especially for people who lost their jobs or saw their income shrinking. As employment dropped by over a million between February and March, it is not surprising that according to a survey by Statistics Canada, more than 30 percent of workers are worried that they might lose their jobs. The pandemic already has a profound effect on the economy, and many wonder how long it will last and how deep it will be. In times of uncertainty, securing your personal finances can help you go back to normal in the aftermath and relieve stress and anxiety. Building an emergency budget, applying for government aid, and dealing with debt are some of the things to do to sail through the crisis.

Build an Emergency Budget

An emergency budget includes essential expenses such as groceries, housing, transportation, and medications. With stay-at-home orders and isolation, many of the non-essential expenses are significantly less, so this is a good time to create a financial cushion to weather the storm. If you are saving toward long-term goals or big purchases such as home renovation or buying a new vehicle, it is best to postpone and focus on building an emergency fund. You can try to reduce some of your fixed expenses as well by lowering your rent, using household appliances at night, and turning off the lights when you are not at home. Contact internet, cable, and cell phone services to check if they have cheaper plans you can switch to. For student and personal loans or credit cards, call your financial institution to check whether they can lower your interest rate. Unnecessary spending must go. This includes things like vacations, entertainment, clothing, and electronics.

Apply for Any Government Aid You Qualify for

The Canadian government introduced a number of economic measures to ease financial hardship and help businesses and households that are struggling financially during the pandemic. Persons not eligible for paid sick leave and staying home are entitled to receive up to $900 bi-weekly in the form of an Emergency Care Benefit. This measure is in place for a period of 15 weeks. Eligible categories include parents looking after children due to school closures, those with sick children, persons taking care of sick family members who tested positive for coronavirus, and those who were ordered to self-isolate or are quarantined or sick. Self-employed persons also qualify. Under the Covid-19 Response Plan, businesses have access to credit through the Business Credit Availability Program, under which they are offered loan guarantees and other types of financial support. Businesses operating in different sectors qualify, including tourism, exports, air transportation, and gas and oil. Support is also offered to businesses trying to avoid employee layoffs and includes the Temporary 10% Wage Subsidy and Canada Emergency Wage Subsidy which pays 75 percent of wages.

Manage Your Finances

To manage your personal finances successfully, it is important to detail your financial goals, whether it is changing careers, starting a family, or buying a new home. You may want to prioritize goals such as saving toward retirement over going on vacation in light of the ongoing pandemic. Once you have established priorities, it is time to create a budget and plan your expenses. List all sources of income that you currently have, for example, wages, salary, alimony, real estate, mutual funds, bonds, and stocks. Then add up all expenses, including rent or mortgage payments, loans, transportation, and groceries. By subtracting expenses from your total income, you will see where you stand. It is also a good idea to track how your income changed due to the coronavirus crisis to see whether it has a serious impact on your finances.

Look for Help if You Are in Debt

How to deal with debt depends on how much you owe, whether you have multiple outstanding balances, and what the repayment terms and interest rates are. Have a look at your credit report and compile a list of all debts, including due dates, monthly payments, rates, and outstanding balances. Track payment progress every few months. If you notice that you made little progress, it is time to look for help. Debt counseling is one option to consider if you feel overwhelmed and are struggling with credit. Contact a reputable agency to work with your creditors and come up with an agreement to repay your debts. Agencies typically need details such as your financial institution, income, outstanding balances, assets, and financial situation in general. Keep in mind that some agencies charge handling and set up fees. There are alternative solutions to look into, depending on your situation, including credit counseling, negotiating with loan providers, and bankruptcy.

Financial Support for Small Business Owners

If you are a small business owner currently experiencing difficulties, it pays to look into options for accessing financing under the Business Credit Availability Program. Non-for-profits and small businesses are eligible to apply for an interest-free loan called the Canada Emergency Business Account. SMEs and non-for-profits are eligible to receive up to $40,000, and those who repay a total of $30,000 can apply for forgiveness provided that the amount is paid in full before or on December 31,2022. Other options for small business owners are cash management advice and payment deferrals offered by banks. Under the BDC Co-Lending Program for SMEs, businesses apply for loans, as 20 percent of the amount is extended by their finance provider and 80 percent by the Business Development Bank of Canada. Principal postponements and working capital loans are also offered to help businesses impacted by the coronavirus crisis. Working capital loans come with no study fees, flexible repayment schedules, and lower rates. Businesses are eligible to apply for up to $2 million.

Take Care of Your Mental Health

Your mental health is as or even more important than your personal finances. Mental health help is offered to all Canadians who experience emotional pain or crisis or have suicidal thoughts. Crisis centres across Canada work to help people who feel confused or stressed, such centres being the Vancouver Island Crisis Society, Telephone Aid Line Kingston, Safe Haven Women’s Shelter Society.

The government also offers advice on how to deal with stress and anxiety in a crisis. In times of physical distancing, communication is important, and people are encouraged to talk to family members and friends through social media, video chats, phone calls, and email. It is also important to exercise, eat healthy and balanced meals, and worry less about things that you cannot control. If you need mental health help, you can call a registered psychologist or your primary healthcare provider. Other sources to look into include Crisis Services Canada, the Kids Help Phone, and Hope for Wellness Help Line. The Kids Help Phone offers emotional support to young people aged 5 – 29 while Crisis Services Canada offers support to all Canadians through crisis organizations and distress centres.

7 Financial Goals to Set in 2020

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Investing a little bit of effort and time in outlining your financial goals will help you to improve your financial situation in 2020. This will also help you to develop a sound long-term strategy for your financial future.

Do Your Taxes Early

Like it or not, the tax season is coming up quickly, and it pays to file your taxes before the deadline. Reporting your eligible expenses and income is far from fun but procrastinating will make it more stressful. The deadline for filing in Canada is April 30, 2020. Early filing also ensures that you receive credit and benefit payments such as the working income tax benefit, GST/HST credit, Canada child benefit, and guaranteed income supplement. Eligible taxpayers are also entitled to claim the Climate Action Incentive if living in New Brunswick, Ontario, Manitoba, and Saskatchewan.

Getting your taxes done early is easier if your income sources include:

  • Grants
  • Bursaries
  • Fellowships
  • Scholarships
  • Support payments
  • Social assistance
  • Employment insurance
  • Disability insurance

Completing your tax returns is not as easy if you have rental or business income, are self-employed, have declared bankruptcy during the previous or current year, or have capital losses or gains. In this case, it is important to get your taxes done early to ensure that you have plenty of time to gather all documents and pay taxes that you owe.

To file your taxes, you will need to provide information such as your home address, banking details, number of children, and marital status. You should also report income in the form of benefits, investments, and self-employment and employment income. Claim tax credits, expenses, and deductions to lower the amount you pay. You can complete your tax returns in different ways, including by phone, on paper, and by software.

Fix Your Credit

The first thing to do is plan to get your credit in check regardless of how much you owe. Start by listing all debts that you owe, including due dates, monthly payments, total amount, and creditors. Make sure you update your list to check on your progress and see where you stand. Making timely payments each month is obviously a must. Late and missed payments will affect your credit score and will make it more difficult to pay off your debts. If you have multiple debts, you may want to set alerts to help you avoid late payments. It is also important to decide which debts to pay off first. If you have multiple credit cards, start with the one that carries the highest interest rate. Make sure you make the minimum payment on your other accounts to avoid penalty interest and to stop your debt from growing.

Create a Financial Plan

Setting a budget will help you to stay focused on your financial goals and get control over your money. There are other benefits to setting a budget such as organizing your savings and spending and paying off debt faster. The first step to creating a budget is to look at your income or how much you can afford to spend on a monthly basis. Start by listing different sources of income such as your salary, wages, alimony, and benefit and credit payments. Other sources of income include rental and dividend income, royalty and interest income, and capital gains. Once you get an idea of how much money is coming in, you have to look at your expenses, including fixed and variable expenses. Examples of variable expenses include car maintenance, home repairs, and groceries. Fixed expenses, on the other hand, include things like credit card and loan payments, car insurance, utilities, rent, and service payments such as cell phone, Internet, and cable TV. Compare your income and expenses to see whether you need to adjust your spending to meet your expenses and save enough to achieve your goals. You can either try to increase your income or cut back on both fixed and variable expenses.

Settle Bad Debts

Paying off bad debts will help you to improve your credit score. Such debts are in collections because you are unable to pay them back. The best thing you can do is settle or pay the full outstanding balance. First contact your debt collector and try to negotiate a settled payment in exchange for deleting the account from your report. Offer an amount that is smaller than what you owe. If this doesn’t work, then offer a full payment to get the account removed.

Make a Long-term Savings Goal

The first step to making a savings goal for yourself is to actually name your goal. Examples of goals include creating an emergency fund, saving to pay off debt, and saving for down payment, your kid’s education, or retirement. Examine your goals to decide whether they are long-term, mid-term, or short-term. Long-term goals such as retirement and college education require a lot of money and careful planning and take several years to achieve. Mid-term goals such as paying off credit card debt or buying a new car do not take as long to achieve but certainly longer than short-term ones. Short-term goals, on the other hand, take one year or less and include things like buying a new washing machine or going on vacation.

Find a Financial Planner

If you lack basic knowledge of debt management, investment, and financial planning, you may want to use the services of a financial advisor. Advisors have expertise across a wealth of topics such as tax strategies, wealth management, insurance coverage, budgeting, and saving. They can help you to develop a financial plan and stick to it as to achieve your long-term and short-term goals. Your advisor will help you to choose from different types of insurance coverage such as disability, term life, and long term care. You may be asked to fill in a detailed questionnaire to help assess your financial situation. The questionnaire typically includes questions about your expenses, sources of income, assets and liabilities, and future income and retirement income sources. The answers will help your advisor to assess your financial strength and risk tolerance. The financial plan that you develop with your advisor will be based on your liquid capital, assets and liabilities, and net worth.

Ready to Invest?

Finding new companies to invest in can be tricky, especially if you have little or no experience. In this case, you may want to invest in companies across different sectors in S&P, including health care, consumer discretionary, industrial, consumer staple, energy, and material. Other sectors to look into are utility, real estate, telecom, technology, and financial. Choose companies that are good for growth or value investing. The approach that you choose to include companies in your portfolio depends on your financial goals and risk profile. If you have a low-risk profile, then consider dividend stocks. Growth stocks are a good option for those who wish to invest in long term growth while value investing is a preferable choice if you are looking for stocks that are trading below their book or intrinsic value.

Financial Secrets Nobody Told You About

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Thinking out of the box is the key to achieving financial freedom and accumulating wealth. Most people believe that earning a college degree and working a well-paid job will help them to earn a good living. Here are some secrets that well-to-do people rarely share that will help you to attract wealth energy.

Budgeting to Build Your Net Worth

Budgeting is the first step to financial stability and the first technique to master. Budgeting means tracking your spending over time to see whether any money is left after covering all expenses. There are bills and expenses that most people pay on a monthly basis – debt payments, groceries, gas, water, and other utilities, transportation, and housing. In addition to regular expenses, there are also less predictable or unexpected expenses such as insurance coverage, gifts, vacations, and home and car repairs. They may reach 10 to 30 percent of your monthly expenses. Budgeting also involves adding up sources of income such as bonuses, salary, and wages. What is left after deducting your total expenses from your income is money that you can use to create an emergency fund or invest to build wealth. If there is no money left to invest and increase your assets, you will never be able to build a healthy net worth.

Increasing Your Net Worth

Budgeting is only the first step to achieving financial freedom. The next step is to focus on your net worth which is the difference between the total assets that you have and your liabilities. Examples of assets to include are tangible assets such as land, inventory, and personal possessions, including collectibles, jewelry, electronics, and vehicles. There are also non-physical or intangible assets such as franchises, software, patents, and copyrights. Personal assets are intangible and tangible and may include things like savings and retirement accounts, insurance, and works of art. Liabilities, on the other hand, are obligations or debt that you owe. Liabilities include things like vehicle and student loans, credit card balances, and mortgage payments. One way to increase your net worth is to eliminate debt and another is to buy assets that generate income. Such assets are, for example, bonds, certificates of deposit, money market savings accounts, and single family rentals.

income

Choosing the Right Investment Instruments to Build Net Worth

The key to building a healthy net worth is choosing the right investment instruments based on factors such as your investment objectives, age, and risk tolerance. There are advantages to being young such as fewer responsibilities, higher disposable income, and higher risk tolerance. If you are in your 40s, there are advantages as well, including more experience and better ability to identify and deal with problem situations. Your investment objective is also an important consideration, whether it is saving for retirement or making high profits. If your goal is to have some type of passive income or to keep your money safe, then investing in low-risk instruments sounds like a good idea. Interest paying bonds and fixed deposits are two options to look into. Bonds can be purchased from different establishments and institutions such as local and state governments, small and large companies, and foreign companies. Depending on the entity offering bonds, there are different types, including foreign, municipal, agency, treasury, junk, investment grade corporate, and corporate bonds.

Fixed deposits are offered by banks and feature higher rates than standard instruments such as savings accounts. Certificates of deposit also pay higher rates and come in different types such as liquid, IRA, jumbo, and traditional. If you have a higher risk tolerance, you can choose from a pool of high-risk options such as contracts for difference, equity investments, spread betting, and venture capital trusts. Investing in biotechnology stocks, for example, is risky, and the reason is that up to 90 percent of experimental drugs and therapies fail. Land banking is also a risky investment because the plots on offer are usually too small, brownfield, or green belt, for which planning permission has not been obtained. Other high-risk investment options include peer-to-peer lending, mortgage real estate investment trusts, and closed-end funds.

Developing Skills and Healthy Financial Habits

Persons who make sound investment decisions also have good money skills and financial literacy.It is important to develop healthy financial habits to stay away from debt and increase your net worth. Essential skills to focus on and master include tax, debt and credit, spending, and saving skills. Analytical skills also help with problem solving, prioritizing, planning, financial planning, and decision making. People with strong analytical skills are also good at risk management and risk analysis, troubleshooting, and data interpretation. Having good financial literacy is also the key to making sound decisions and achieving short- and long-term financial goals. People with good financial literacy have understanding of basic concepts such as interest rates, repayment terms, inflation, bear and bull market, and liquidity.

Diversifying Your Income

Relying on a single source of income can be risky because you are dependent on it, whether it is your regular job or rental income. The main types of income to look into are capital gains, royalty, rental, dividend, interest, profit, and earned income. Profit income refers to profits made by selling goods or offering services. Interest income is money that you get by investing in different interest-bearing products which basically means that you are lending money to an individual or institution.

Dividend income is an example of a passive source of income that you get by investing in company shares. Common types of dividends include liquidating, scrip, property, stock, and cash dividends. Building a balanced portfolio involves investing in a mixture of instruments for optimal returns. A conservative portfolio includes up to 75 percent of fixed-income securities, between 5 and 15 percent of cash and cash equivalents, and 15 to 20 percent of equity investments. A moderate-risk portfolio, on the other hand, includes up to 40 percent of fixed-income instruments, between 5 and 10 percent of cash and cash equivalents, and up to 55 percent of equities. After deciding on the right mix of assets, the next step is to choose from different sub classes of assets such as corporate and government debt or foreign and domestic stocks. The last step is to choose from different investment instruments such as exchange-traded funds, mutual funds, bonds, and stocks.

There are simple things to do to achieve financial security and freedom, including budgeting to find out whether any money is left to try to increase your net worth. Assessing your present net worth, on the other hand, will help you to see how close you are to reaching your financial goals. Choosing the right investment instruments will also help you to build your net worth and mastering basic money skills will help to this end. Financially literate people know how to track their spending, manage debt, create and stick to a budget, and make sound decisions when it comes to choosing the right insurance product or investment tool. Financially literate people are also in a better position to avoid costly mistakes such as being defrauded or falling victim to predatory lenders. Mastering essential money skills is the key to achieving financial health and making money work for you in the long run.

Best Credit Cards for 2020

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Canadian issuers such as the Bank of Nova Scotia, Desjardins, and Bank of Montreal feature rewards, cashback, low annual fee, student, and other types of cards that are not to miss. Customers enjoy a number of added perks such as rewards schemes, concierge services, car rental discounts and insurance, and sign-up bonuses.

Best Travel Credit Cards

Scotiabank Gold American Express

Scotiabank features a travel card that offers rewards points on entertainment, dining, grocery shopping, gas, and other eligible purchases. Their Scotia Rewards Travel Service enables customers to book travel and enjoy a comprehensive insurance package. Other travel perks and incentives include special offers, Priority Pass membership and access to airport lounges, and concierge services. The card offers additional benefits such as access to fashion, music, film, and dining events.  Supplementary cards are also available.

  • Annual fee: $99
  • Interest rate: 19.99 percent
  • Balance transfers and cash advances: 22.99 percent
  • Limited time offer: Earn 20,000 bonus Scotia Rewards points with your first $1,000 in everyday purchases in first 3 months. Offer ends on March 1, 2020

Home Trust Preferred Visa

Home Trust offers a Visa card with travel benefits such as no foreign exchange conversion fees, auto rental collision insurance, and roadside assistance. Roadside assistance is offered free of charge and entitles customers to 4 service calls annually. Cardholders also earn 1 percent cash back on all items charged to the card, and there is no limit to the amount that can be earned.

  • Annual fee: none
  • Interest rate: 19.99 percent
  • Cash advance rate: 19.99 percent

Best Low Fee Credit Cards

MBNA Rewards Platinum Plus MasterCard

This rewards credit card by MBNA is a good deal in that it allows customers to earn points on a daily basis. Every dollar spent on eligible purchases earns 2 points, including dining, grocery items, and gas. A welcome bonus of 2,500 points is offered with the first purchase to customers who opt for e-statements. Cardholders are free to redeem points for gift cards, travel, merchandise, charity donations, etc. They also enjoy everyday and security services such as lost luggage assistance, emergency services, and ticket replacement.

  • Annual fee: none
  • Purchase rate: 19.99 percent
  • Balance transfer rate: 22.99 percent
  • Cash advance rate: 24.99 percent

Blue Sky Credit Card

This card by American Express also features multiple benefits such as free additional cards, access to special offers and reserved tickets, and travel coverage. Customers are offered the chance to make restaurant reservations and buy presale tickets for special events, including theatre performances and concerts. An added advantage is the fact that there are no travel and seat restrictions. The first $500 purchase earns 10,000 rewards points, and referring a friend earns additional $5,000 points. Each dollar in purchases is equal to 1.25 points.

  • Annual fee: none
  • Interest rate: 19.99 percent
  • Funds advance fee: 22.99 percent

Best Canadian Cashback Cards

Scotia Momentum® Visa Infinite Card

Offered by the Bank of Nova Scotia, this cashback card features a special offer so that customers earn 10 percent back on all purchases made during the first three months. Each dollar spent at grocery and drug stores earns 4 percent and at gas stations – 2 percent.  Other benefits worth mentioning include concierge services, access to dining experiences and premier events, wine purchase discounts, complimentary wine tastings, and more.

  • Annual fee:  $99
  • Cash advance rate: 22.99 percent
  • Purchase rate: 19.99 percent
  • Credit limit: 5,000 or higher
  • Limited time offer: Earn 10% cash back on all purchases for the first 3 months (up to $2,000 in total purchases). Plus, no annual fee in the first year, including on supplementary cards. A welcome offer value of $350*. Offer ends on April 30, 2020

Meridian Visa Infinite Cash Back Card

Also a great credit card to earn money on purchases, Meridian Visa Infinite features 10 percent cash back on items charged during the first 3 months. Utility bills and pharmacy purchases earn 2 percent, grocery and gas earn 4 percent, and all other purchases – 1 percent. Rewards can be redeemed in the form of gift cards, account credit, events tickets, and merchandise. The card also comes with a comprehensive insurance package, including travel assistance, baggage insurance, and emergency health care coverage.

  • Annual fee: $99
  • Purchase rate: 19.50 percent
  • Cash advance rate: 21.99 percent

Best Rewards Credit Cards

American Express Cobalt

Also a good choice to earn rewards points, this card by American Express comes with a low interest rate and a welcome bonus of 30,000 points for purchases worth $500 made on a monthly basis. Each dollar spent in cafes, bars, and restaurants earns 5 rewards points. Supplementary cards are offered at no additional cost. Customers enjoy multiple benefits, including shopping deals, weekend gateway experiences, advance movie screenings, reserved tickets, and presale tickets for major events.

  • Monthly fee: $10
  • Interest rate: 19.99 percent
  • Funds advance rate: 22.99 percent

BMO World Elite MasterCard

The Bank of Montreal also offers a rewards card with shopping and travel benefits, an annual fee waiver during the first year, and a welcome bonus of 35,000 points. One dollar spent on everyday purchases earns 2 points, and $1 on entertainment, restaurant, and travel purchases earns 3 points. Customers also benefit from access to vacation packages, cruises, car rentals, and other travel benefits.

  • Annual fee: $150
  • Cash advance rate: 22.99 percent
  • Purchase rate: 19.99 percent
  • Annual income requirement: $150,000 for households; $80,000 for individuals

Best Credit Cards with Travel Insurance Coverage

Scotiabank Platinum American Express

Customers who need a card with comprehensive travel coverage may check this card by Scotiabank, which also features an attractive rewards scheme. Travel coverage includes travel accident, travel emergency medical, flight delay, lost and delayed baggage, and other types of insurance. Cardholders also earn 1 point per dollar on everyday purchases and 4 points per dollar on entertainment, gas, dining, and grocery purchases. The list of added benefits includes concierge services, access to special offers, experiential tours, culinary experiences, and Hertz #1 Club Gold membership.

  • Annual fee: $399
  • Cash advance rate: 22.99
  • Interest rate: 19.99 percent
  • Minimum credit limit: $10,000

Desjardins Odyssey Visa Infinite Privilege

This Visa card also comes with a comprehensive insurance package, including travel, common carrier accident, emergency health care, trip interruption or cancellation, and baggage insurance. The card also offers 2 percent cash back on purchases and features wine and food experiences, concierge services, and hotel and travel benefits. Customers enjoy exclusive travel benefits such as airport parking discounts, security fast track lanes, and Priority Pass membership. Hotel benefits include beverage and food credit, complimentary daily breakfast, and automatic room upgrades based on availability.

  • Annual fee: $295 for members; $395 for non-members
  • Interest rate: 9 percent
  • Minimum annual combined or individual income: $200,000

Best Student Credit Cards

BMO SPC® CashBack® Student MasterCard®

This credit card by the Bank of Montreal is especially designed for students and features discounts on food, dining, clothing, beauty, and other items. Cardholders are offered 5 percent cash back on purchases during the first three months and 1 percent after the promotional period. Students also benefit from access to sports events, premiers, and concerts, exclusive deals, and add-ons such as BMO Roadside Assistance and Credit Alert. A signature or reference letter from parents is not required.

  • Annual fee: none
  • Standard interest rate: 19.99 percent
  • Cash advances: 22.99 percent

Scotiabank Scene Visa Card

Scotiabank also offers a student card that is suitable for young people with no credit history. The card features a rewards program that offers customers the chance to earn 5 points per dollar on Cineplex purchases and 1 point on everyday purchases. Scotiabank offers multiple benefits such as discounts on car rentals, supplementary cards, and optional protection in case of critical illness, lockout or strike, job loss, disability, etc.

  • Annual fee: none
  • Cash advance rate: 22.99 percent
  • Standard rate: 19.99 percent
  • Minimum credit limit: $500

Best Secured Credit Cards and Credit Cards for Bad Credit

Home Trust Secured No Annual Fee Visa

This card is a good option for borrowers with tarnished credit and requires a security deposit as a guarantee of repayment. The minimum deposit is $500 and the maximum deposit – $10,000. Customers can use the card to book vacations and make online or in-store purchases. Cash can be accessed at ATMs with the Plus and Visa logo. The approval rate is quite high (over 95 percent), which makes this secured card a good choice for customers who seek to reestablish credit.

  • Annual fee: none
  • Purchase interest rate: 19.99 percent

OR

  • Annual fee: $59
  • Purchase interest rate: 14.99 percent

Refresh Secured Visa

Apply Now for Quick ApprovalThis secured card from Refresh helps customers build credit and comes with beneficial features such as low security deposit, easy approval, and free financial resources and education. Cardholders are offered free courses on different topics, including finances, money, how to set financial goals, and how to improve credit.

  • Annual fee: $48.95
  • Interest rate: 17.99 percent

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Scotiabank Value® No-Fee Visa Card

This card is a good choice for newcomers to Canada and persons with no credit history. Scotiabank offers the option to transfer balances, and customers benefit from a low 3.99 percent introductory rate during the first 6 months. Additional benefits for cardholders include car rental discounts and Visa Checkout.

  • Annual fee: none
  • Purchase rate: 16.99 percent
  • Balance transfers and cash advances: 16.99 percent
  • Minimum credit limit: $500

Best Balance Transfer Credit Cards

MBNA True Line MasterCard

This MasterCard by MNBA comes with a zero promotional rate on balance transfers during the first 10 months, allowing customers to transfer high-interest balances. There are many benefits for cardholders, among which legal assistance, pre-trip information, and lost ticket and lost card replacement. Up to nine authorized users can be added free of charge.

  • Annual fee: none
  • Cash advance rate: 24.99 percent
  • Purchase rate: 12.99 percent

President’s Choice Financial® MasterCard®

Another option by President’s Choice Financial, this card comes with a very low balance transfer rate of 0.97 percent during the first 6 months. Customers also earn 3 cents per litre at Mobil and Esso gas stations, 25 points per dollar at Shoppers Drug Mart, 20 points per dollar at PC Travel, and 10 points on all other purchases. Added benefits for cardholders are emergency cash advances, free extended warranty, and the option to request up to 4 additional cards at no added cost.

  • Annual fee: none
  • Purchase rate: 19.97 percent
  • Cash advances: 22.97 percent

Best Store Credit Cards

Triangle™ World Elite MasterCard®

This card by Canadian Tire allows holders to earn 3 percent on grocery purchases, 5 – 7 cent per litre at Husky and Gas+ stations, and 4 percent in CT money.  Customers also enjoy perks such as concierge services, personalized offers, roadside assistance, and access to exclusive events.

  • Annual fee: none
  • Purchase rate: 19.99 percent
  • Cash advances: 22.99 percent
  • Minimum annual income: $80,000

Capital One® MasterCard

This card is offered to Costco members and features 1 percent cash back on regular purchases, 2 percent on gas, and 3 percent on dining. The array of everyday and travel benefits includes travel assistance, baggage delay and common carrier travel accident insurance, and price protection.

  • Annual fee: none
  • Interest rate: 19.75 percent

There are plenty of great credit cards that offer money back, rewards points, comprehensive insurance coverage, low interest rate balance transfers, and other incentives. Financial institutions offer cards to customers with different credit scores, including secured cards to help build credit and take advantage of a wealth of attractive offers.

 

Is Being Debt-Free Possible?

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It is possible to live debt-free if you set a budget and realistic goals and stick to them, live within your means, avoid high interest rate loans, and pay off outstanding balances.

Set Budget and Goals

The first step to being debt-free is to set a monthly household budget and weigh your income and expenses. Make a list of essential expenses such as property taxes, rent or mortgage, gas, water, and electricity bills, and groceries. Think of other expenses such as coffee, restaurants, baby sitting or daycare, alimony, child support, credit card balances, etc. Make note of expenses that you can cut if the total amount exceeds your income. Then you should list all sources of income in your household. These can be salaried income, wages, real estate investments, unemployment compensation, or business net income. Other sources of income include high-yield savings, compensatory damages, cash rebates, and sick pay benefits. Add up your expenses and your income sources and see whether you will have any money left by the end of the month. If your expenses exceed your income, this is a red flag which- shows that you are financially vulnerable and should adjust your budget accordingly.

Live within Your Means

Whether you are in the low- or high-income bracket, living from paycheck to paycheck is simply making ends meet. But it can be worse. Many people make impulse purchases that they later regret or buy things that they rarely or never use. Some people tend to stock up on food and products that are on sale and spend a lot of money. Instead of buying items on their shopping list, they end up purchasing 10 cans of kidney beans and 50 whole-grain cereal bars. Buying complementary items is also a mistake when you try to stick to a budget.

Do Not Use Payday Loans

Many payday lenders in Canada offer short-term loans with unfavorable terms and extremely high interest rates. This is a last resort for people who face unexpected expenses and emergencies and cannot access better solutions such as low interest rate cards and lines of credit. The problem with payday loans is that charges can be as high as 30 percent of the total amount borrowed. The interest rate is much higher than that of standard solutions such as personal loans and lines of credit. The focus should be on building savings for rough times and unexpected expenses. People who often resort to payday loans are usually advised to try to build a healthy score so that they have access to different borrowing solutions.

Pay off Your Credit Card Debt and Use Only Cash or Interac

If you have multiple cards and excessive debt like many Canadians do, it is high time to start paying off your outstanding balances. One way to go about this is to focus on one card at a time. Compare interest rates and start with the card that goes with the highest rate. Another option is to pay the smallest balance first and then focus on the next smallest balance. If you carry large balances, you should always try to pay more than the minimum. This is also a good way to save on interest charges, especially if you have high interest credit cards. Once you have paid your card balances, you should try to use cash or Interac only to avoid accumulating debt. People usually spend less because they physically hand over their hard-earned money. Using cash also makes it easier to budget by allocating money to different spending categories. With credit cards, it is much easier to lose track of spending and overspend. Of course, whether you use cash or credit depends on the particular situation and your finances. If you only make small, occasional purchases, then you can use your credit card. If you are not organized and are usually late on bill and credit card payments, then you may want to use debit or cash. And if you have excessive debt, it is best to use cash only.

Another option is to use Interac to pay for products and services. Your card will be linked to your savings or checking account to make payments. This allows you to keep track of your purchases and spending. One of the major benefits is that you use your own cash instead of credit. Another benefit is that you can use your card to make purchases online and from different retailers. An added benefit is the fact that many financial institutions in Canada feature Interac Debit, among which CIBC, ATB Financial, West Credit Union, Unity Credit Union.

Never Get a Cash Advance

It is best to avoid cash advances to stay away from financial trouble. The problem here is that this is a type of loan that adds to your card debt. If the fee is 5 percent or $5, whichever is greater, you will pay $15 on a $300 advance. Another problem is that the interest rate is typically higher than the balance transfer and purchase rates, and borrowers also pay ATM fees. An added problem is the fact that there is no interest-free or grace period meaning that charges begin to accrue at the date of the transaction. So, instead of getting a cash advance, it is better to look into alternatives such as a peer to peer or personal loan, salary advance from your company, or loan from family members or friends.

Use Debt Consolidation to Get Your Finances in Order

Using consolidation is one way to get control of your finances if you have multiple debts. In this case, you take out a single loan and combine multiple payments. Many banks in Canada offer this financial solution, including RBC, CIBC, TD Bank. Banks allow customers to combine different types of debt such as personal loans, lines of credit, and card balances. There are multiple benefits for borrowers, and one is that they save a lot on interest charges. If you have two or more credit cards with high interest rates, for example, debt consolidation is definitely an option to explore. The fact that you have a single payment to make, instead of multiple payments, makes it easier to avoid being late. Obviously, you will also feel relief knowing that your accounts will not be turned over to a collection agency. There are downsides as well, one being that financial institutions usually require good credit. If your score is less-than-perfect, you may not qualify. Another downside is that consolidation loans usually go with higher monthly payments because the terms are shorter than standard loans.

Whether consolidation is the best solution depends on different factors such as amounts due, types of debt, income and assets, etc. There are alternatives to consider, including credit counseling, personal bankruptcy, debt settlement, cash-out refinance, HELOCs, and home equity loans. All solutions have pros and cons. Debt settlement, for example, allows borrowers to get lower interest rates but they cannot access credit when they are in the program.