Canada Finance Blog

The Ideal Way to Settle Your Credit Card Debts

Being in debt is a common phenomenon and credit card debts constitute the major part of total debts. It looks so funny when we find people searching for different ways to settle their credit card debts when they have sufficient money in their savings account. Some say that they don’t like to withdraw money from their savings account because they have saved up the money for a specific purpose and that money will be utilized only for that purpose. Instead, they try to settle their debts with money either from their retirement benefits or from a mortgage. Let us now look at the relative advantages and disadvantages of using and not using the money that is lying in their savings account.

If you are planning to withdraw money from your IRA account before the stipulated time, you are liable to pay penalties. To make matters worse, the amount you will get after retirement will be too little. Remember that you will have no other source of income after retirement and the only income to pull on the rest of your life is the money in your IRA. So, leave it untouched and let it be there for your old age. A viable alternative is to take a loan by mortgaging your home. If the mortgage loan carries a lower rate of interest than the credit card debts, you will be a gainer. But you are assuming a greater risk by mortgaging your home. In case you are not able to pay back the mortgage loan, your home will be seized by the mortgagee. In the case of not paying your credit card debts, the worst you can expect to happen is a hit on your credit score. It is, therefore, advisable to take a mortgage loan only if you are confident that you would be able to pay back the loan on time. The best way to pay off your credit card debts, of course, is to use the money in your savings account. Savings accounts carry a very low rate of interest and it doesn’t make sense to keep your money in your savings account while you pay a very high rate of interest on your credit card debts.