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(Cinders McLeod/The Globe and Mail)
(Cinders McLeod/The Globe and Mail)

Dave McGinn's Mr. Miser

How to get out of debt? Freeze your credit card - literally Add to ...

It was as if the credit-card company had read my mind. This was amazing. But this was also potentially a big, big problem.

I mean, I'm trying to get out of debt, not further into it.

For the longest time, however, I've been listening to friends tell me about their special credit cards. These friends buy everything on cards that allow them to collect air miles and then, boom, they're off to Paris or wherever. Whenever I hear these stories I think, "I like free trips. Why don't I have one of those cards?"

So when an application for one came in the mail a few weeks ago, I jumped at it. When the card arrived, it shone like the ring in Lord of the Rings. I was practically stroking it with adoring fingers and calling it, in Gollum's whispery voice, "my precious."

What this means though, is that now I have three credit cards. And this, according to experts, puts me in the danger zone.

"We really only recommend you have one or two, because they do get harder to manage," says Tracy Watson, director of communications at Money Mentors, an Alberta-based non-profit organization dedicated to educating people about finance.

Getting into debt is easy. Trust me. And it can be really, really fun. Getting out? Not so much. But with a little bit of planning and by following a few simple tips, it's easy enough to leave the red and get back in the black. Unfortunately, getting rid of credits cards - even ones that theoretically could you save you money in the long run - is usually step No. 1.

Scoff at me all you like for relying too much on my credit cards. Fine. But I'm not the only one who's used that little piece of plastic to dig myself into the hole.

Household debt in Canada reached $1.41-trillion in December, 2009, according to a report released earlier this month by the Certified General Accountants Association of Canada. If that debt was spread across Canadians, each individual would be $41,740 in debt last year, which is 2.5 times more than in 1989.

And you shouldn't need many guesses to figure out where all that debt is coming from. The share of consumer debt represented by personal lines of credit and credit cards issued by chartered banks jumped to 77.7 per cent last year, from 21.1 per cent in 1989, according to the report.

"You really should minimize the number of credit cards you have and possibly not have any in your wallet," says Tony Ariganello, president and CEO of CGA-Canada.

Mr. Ariganello also recommends consolidating debt, which should get you a lower interest rate, and putting money away "religiously" on a weekly basis. Even just $20 a week is going to help significantly.

Ms. Watson has this fun tip for anyone with a credit card: Freeze it. "You put it in a glass of water and you put it in the freezer, because in a drawer you can get it out quickly."

When you decide you must have something, wait until the ice has melted. By then you probably will have changed your mind.

"Credit is certainly not a bad thing, but it's how you manage it," Ms. Watson explains.

The first step in managing credit is knowing where you spend it, says Laurie Campbell, executive-director of Credit Canada, a Toronto-based organization that helps people deal with debt.

"People really need to recognize where their money is going."

This doesn't mean having to account for every nickel. It just means recognizing spending habits and adjusting them accordingly. For example, if you go out for dinner every week, perhaps you need to go to a restaurant every other week instead. Or, maybe you rent a movie rather than taking the whole family to the theatre.

"It's a little bit here and a little bit there," Ms. Campbell says. "It's amazing what you can save."

Then, it's a matter of being strategic with those savings. Say you've got an extra $100 each month. The best thing to do is to look at what debt has the highest interest rate and keep putting that $100 on it until you're in the clear, Ms. Watson says.

Or, if you've only got a relatively minor amount on one credit card, keep throwing the $100 on it. That way, you'll get the satisfaction of paying it off.

Getting out of debt is like going on a diet. Tell yourself you're only going to eat celery for a month and you'll be gorging on cookies within two weeks, max. Or you'll just revert to your ordinary eating habits.

But the fact is, credit isn't a free ticket to the buffet. I know this because, in a weird mix of metaphors, I nearly used my new credit card to eat at an actual buffet.

Instead, I made dinner at home. And I've since put my other two cards in a drawer, where they'll remain until they're paid off. As for my precious, I'm resisting its power like Frodo.

But every time I open my wallet, the card shines its dangerous, seductive power at me. "You could be getting points right now," it whispers in my ear. "Don't you want a free vacation? Go buy, go buy, go buy."

I might have to freeze it.

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