The holidays are a great time, but they often come with a January price tag.
For many, that price often leaves them in the red.
That’s why the Credit Counselling Society is reminding people it only costs time to reach out to their services and get help planning their way out of debt.
Mason Cox, the society’s director of counselling, said consulting with the not-for-profit society is free, and people shouldn't hesitate to reach out if they feel they’re in need of assistance.
Cox noted it’s very common to see people incur credit card debt during the holidays. He’s also observed people using personal lines of credit or payday lenders to supplement their income for presents and holiday events.
“Those kinds of things are usually what we see this time of year, usually coming in after the holidays,” he said. “Once [the bills] start coming in, those are the eye-opening experiences for most.”
This is all coming in the context of an economy that has seen inflation create more burdens for just about everyone.
Cox noted that reports have stated that inflation is coming down, but the average consumer has yet to see that materialize in their day-to-day life.
Even before the holidays, higher prices have been taking their toll.
“When they go to the grocery store. When they're pumping gas. Even before we get into the holiday season, I think a lot of people were already starting to feel that crunch,” said Cox. “Things just are more expensive. That's the truth of the matter.”
Interest rates are something that consumers should be paying attention to, he said.
Higher mortgages are leaving less for basic necessities, let alone holiday spending.
“That's even less money you can spend on those more-expensive groceries,” Cox said.
And while much of the news has been about mortgage holders being pummelled by larger bills, the higher policy rates set by the Bank of Canada also affect how companies charge interest on credit card debt and lines of credit, Cox said.
“Now it's costing more to service the debt loads that you’re carrying rather than having that money in your pocket for other expenses here and there,” he noted.
So when should people reach out for help?
Cox said that’s dependent on each person’s situation.
There’s no hard number or threshold for a person to start getting assistance.
“I've seen clients who are struggling to pay back $100,000 worth of debt. I've seen clients who are struggling to pay back, you know, $1,500 worth of debt,” he said.
People need to get an understanding of their financial picture.
“A lot of us think about our income in terms of the gross amount,” said Cox. “But let's be talking about the real amount—what actually goes in the bank account at the end of the day, minus the taxes, minus the deductions and all that. What money do you actually truly have to spend on a month-to-month basis?”
It also involves asking yourself if you can do what you want with the money you have. Another question, Cox said, is to figure out what goals you have for your debt. Are you seeking to pay it off in a set amount of time? How urgent is it for you to pay off what you owe? Can you accept a lower credit score?
“If you're feeling the pressure, it's always better to ask for help sooner rather than later,” he said.
People seeking help for debt should also be aware of the different kinds of solutions available.
There are many agencies promising to wipe away a person’s debt, but not all of them talk about the repercussions they have on people, Cox said.
“Sometimes those repercussions are very important to an individual. Sometimes they don't matter as much,” he said. “When we talk about repercussions. Generally, we're talking about an impact to your credit history or your credit score or the actual cost of servicing that debt.”
Options for help
Options can be categorized in different areas.
Self-managed options involve finding sources of income via help from friends, family, or taking extra work or selling off assets, he said.
The next option involves having a creditor give up something to help make payments easier.
“With those, you’re usually looking at, ‘Can I go back to a financial institution?’” said Cox. “Maybe they're looking at consolidation, right? Can they lower the interest rate and put it kind of all into one area in which I'm paying back. Banks are usually happy about that, in the sense that they're still making a little bit of money.”
Other options involve having creditors reduce interest altogether.
“If your credit score is not a concern to you, maybe that's actually beneficial,” said Cox. “You're still able to pay back the debt, [but] maybe [your credit score] takes a little bit of an impact.”
Then there are also the legal options, such as bankruptcy or consumer proposals.
“Sometimes people just don't have the capacity to actually repay the debt,” said Cox. “Their situation doesn't allow it. And that's why these options exist.”
Cox said that the Credit Counselling Society is a not-for-profit and derives most of its money from donations. It also derives some of its resources from nominal fees from debt repayment programs.
