BMO Bank of Montreal
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BMO Bank of Montreal

February 14, 2012 06:00 ET

BMO Credit Card Health Check: Prognosis is Good for Credit Card Users as Two-Thirds of Canadians Paid Off Their January Credit Card Bill in Full

- Five of six Canadians said there were no surprises on their January credit card statement - their balance was what they expected.

- Two-thirds (67 per cent) said they would pay off their January credit card balance in full.

- Reducing overall household debt is number-one priority for Canadians in 2012.

- Men will carry a higher credit card balance into February than women.

TORONTO, ONTARIO--(Marketwire - Feb. 14, 2012) - There were no unpleasant surprises for the majority of Canadians who opened their post-holiday January credit card statements this year, according to a BMO Credit Card Health Check Report released today by BMO Bank of Montreal.

Relatively few Canadians reported their January credit card balance was higher than expected, as most either held to their holiday spending budget or came in under budget. Two-thirds say they will pay off their January credit card balance in full.

"This is very encouraging news, given the recent attention to worrying trends in Canadian household debt levels," said David Heatherly, VP, Payment Products, BMO Bank of Montreal. "With so much focus on reducing household debt, we are seeing evidence that Canadians have reined in their spending and are managing their credit cards more prudently than ever."

One in six Canadians polled in the BMO Credit Card Health Check indicated that their January credit card balance was higher than expected, although nearly half said the balance exceeded their expectations by 25 per cent or less.

Those who said they would not pay their January balance in full indicated they would carry, on average, $4,008 of credit card debt into February. Interestingly, men will carry a higher credit card balance into February than women - on average, $4,587 to $3,306 respectively - even though 80 per cent of Canadian households said the female head did the majority of the holiday shopping.

Timelines for paying off those balances varied from a couple of months to more than a year.

"We always encourage our customers to pay down credit card debt as quickly as they can to avoid or minimize interest costs," said Mr. Heatherly. "But we also understand that there are times, such as holiday spending, when Canadians do tend to give themselves a little leeway on their budgets. If you do have to carry debt, consider moving high interest rate balances to a low interest rate loan or line of credit, or a lower-rate credit card.

"For example, for only $20 per year, BMO's preferred rate credit card carry's an interest rate of only 11.9 per cent. On an average balance of $4,000, cardholders can save more than $200 over the course of the year in interest costs alone, compared to higher-rate cards."

"Based on our research, I think it's clear that the majority of Canadians are prudent and disciplined; they treat their credit cards as secure and convenient payment tools rather than borrowing tools, which is absolutely how they should be regarded," said Mr. Heatherly.

Mr. Heatherly stated that credit cards remain the most preferred method of payment among Canadians noting additional benefits such as purchase protection, extended warranties and the ability to earn rewards on purchases.

BMO offers the following tips to managing credit card debt responsibly:

  • Track your spending - Develop a household budget with realistic expectations and a clear understanding of your monthly expenses and income, with an eye to eliminate unnecessary spending. BMO MoneyLogic helps track your money easily and in one place so that you can see exactly how much you spend each month and what you spend it on. www.bmo.com/moneylogic
  • Don't overspend - Don't let monthly interest charges eat away savings from merchant sales, discounts and rewards programs. Only spend what you know you can pay off in full at the end of the month.
  • Opt for a low-rate credit card - If you are carrying a balance on a higher rate credit card, consider moving your balances to a low interest-rate loan or line of credit, or a lower-rate credit card. BMO offers a preferred rate credit card for as low as 11.9 per cent interest rate ($20 annual fee).

  • If you're a collector, you don't have to give up premium rewards to get a low rate. BMO offers a low-rate option of 12.9 per cent on its BMO AIR MILES and CashBack credit cards for an annual fee of $45.

  • Take control of your spending with a pre-paid credit card - If you have trouble keeping track of your spending and sticking to a budget, consider using a pre-paid credit card from Bank of Montreal. A pre-paid credit card can be loaded with a pre-determined amount of money so you only spend what you put on the card. There are no monthly bills and no interest charges, and you enjoy similar advantages as a regular BMO credit card including protection against theft or loss, and wide international acceptance.

Regional findings of the BMO Credit Card Health Check are available upon request.

The BMO Credit Card Health Check study was conducted by Leger Marketing among 1501 Canadian adults between January 30, 2012 and February 2, 2012. A probability sample of the same size would yield a margin of error of ± 2.5% 19 times out of 20.

Web: www.bmo.com

Twitter: @BMOmedia

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