BMO Bank of Montreal
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BMO Bank of Montreal

June 24, 2011 13:44 ET

Owe Canada: BMO Offers Canadians Tips on How to Reduce Debt

- Compared to last year, more Canadians are living at or beyond their means (32 per cent vs. 20 per cent)

- More than one-quarter (27 per cent) are living paycheque to paycheque compared to 16 per cent in 2010

- BMO offers tips and advice to help manage household finances and pay down debt faster

TORONTO, ONTARIO--(Marketwire - June 24, 2011) - New figures released this week show household credit market debt climbed to an all-time high of $1.524 trillion in Q1, or a record 147.3 per cent of disposable income. While growth in household debt has cooled in recent months, it continues to outstrip income growth.

Additionally, the 2011 BMO Annual Summer Spending Study shows 32 per cent of Canadians are living at or beyond their means, with 27 per cent living paycheque to paycheque – a 10 per cent increase over last year.

"Developing and following a straight-forward, realistic budget that includes both monthly expenses and leisure spending can help to simplify your financial picture, keep things on track and identify areas where spending can be scaled back if necessary," says Lynne Kilpatrick, Senior Vice President, BMO Bank of Montreal.

Ms. Kilpatrick notes that web-based personal finance tools, such as BMO MoneyLogic, are becoming increasingly popular, and can provide immediate insights into spending and savings habits.

She adds that since the launch of BMO MoneyLogic, an online, intuitive personal financial management tool, more than 240,000 customers have set savings goals since the beginning of the year - an encouraging sign.

BMO offers the following tips to help Canadians pay down debt - including mortgage and credit card debt - become debt-free faster:

Pay down credit card debt

  • Whenever possible, target high interest debt and pay off your entire credit card balance every month.
  • Consider a credit card with a low interest rate option and try to pay more than the minimum payment due. The faster you pay off the balance, the less interest you'll pay.
  • BMO offers several credit cards with a low interest rate options such as 12.9 per cent for a $35 annual fee, with a choice of included rewards. BMO also offers a Preferred Rate MasterCard at 11.9 per cent with $20 annual fee.

Consider a shorter amortization when purchasing a home:

  • The shorter the life of the mortgage, the less you pay in interest.
  • Choosing a 25 year amortization can help you become mortgage free faster and ultimately put more savings towards long term goals, such as retirement.
  • BMO offers a five-year fixed low-rate mortgage at 3.79 per cent with a maximum 25-year amortization.

When planning to buy a new home, make sure you can afford what you're signing up for:

  • Stress-test your budget using a mortgage payment based on a higher rate.
  • Total housing costs (mortgage payments, property taxes, heating costs, etc.) should not consume more than one-third of household income.

The Leger Marketing survey was completed on-line from May 9th to May 12th, with a sample of 1512 Canadians, 18 years of age or older. A probability sample of the same size would yield a margin of error of ±2.5 per cent, 19 times out of 20.

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