The TD Canada Trust 2011 Report on Savings has revealed that 38 percent of Canadians do not have savings, and 54 percent of them find it impossible to save. What are the main reasons Canadians cannot save enough or nothing at all? Some 30 percent of them do not earn enough to meet their living expenses, 39 percent spend a large portion of their disposable income to pay off debts, and 12 percent of Canadians shop and live beyond their means.
There is more to the story. Many Canadians make credit card mistakes that prevent them from saving. To begin with, some people pay 10 percent or higher in interest rates on credit cards and save money on no or low interest accounts, explains chartered financial planner Jonathan Taylor at Ross Taylor Financial. Some Canadians hold onto high-interest loans and other debts while paying down credit cards with low interest rates. Moreover, borrowers tend to opt for top rates so that they do not have to pay an annual fee. Others do not make the most of their low interest credit card, meaning that they do not use it to pay back high-interest debts (Credit Cards).
Other mistakes to avoid include missing to check foreign transaction fees, giving other people signing rights, and not calling the bank to reduce the interest rate on high-interest credit cards. Those who are trying to reduce their debt should ask credit card issuers if it is possible to get a reduced interest rate. It is a wise idea to gather a couple of offers for low interest credit cards and threaten to leave if the issuer does not agree to lower your interest rate (US News). To many people, calling their credit card company or bank to ask for a lower rate of interest sounds intimidating. But remember that financial institutions are used to cardholders emailing and calling all the time. Point out that you consider declaring bankruptcy or that you are a good customer and you have received a couple of offers from other card issuers you may consider (Canadian Living).
Apart from credit cards, many Canadians make other mistakes that prevent them from saving. One is not taking advantage of lines of credit. Debtors can use a line of credit to lower interest charges and pay off multiple debts faster, notes Jonathan Taylor. For example, a person who has $20,000 on a line of credit and has his paycheck deposited into it may choose to pay all bills using the same credit line. In this way, interest charges are shut down for days or even weeks. Debtors who make use of this strategy save between three and four percent in interest which is tax-free. Note that the government taxes people on earning money not on saving it. Finally, many people do not take advantage of the possibility to discuss their situation with a financial adviser. This is a good way to learn how to reduce costs in taxes and maximize returns (Credit Cards).
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