Debt
How to Pay Off Credit Card Debt in Canada
Five ways to pay off credit card debt in Canada, with the math: paying $400 a month on $7,500 across three cards clears it in 1 yr 11 mo; the minimum only would take 24 yrs 10 mo.
What is the fastest way to pay off credit card debt?
Stop adding to the balance, pay a fixed amount well above the minimum every month, and direct every extra dollar to the card with the highest interest rate. A lower rate, through a balance transfer or a consolidation loan, speeds it up further.
Even a small increase helps: a higher monthly payment shortens the time to pay off your balance.
Put it into practiceCredit card payoff calculatorAvalanche or snowball: which method is better?
The avalanche method (highest rate first) costs less interest; the snowball method (smallest balance first) clears a card sooner, which some people find motivating. With $400 a month on three cards totalling $7,500, avalanche costs $1,412 in interest and snowball $1,587.
| Method | First card paid off | Debt-free in | Total interest |
|---|---|---|---|
| TopAvalanche (highest rate first) | Card A, month 10 | 1 yr 11 mo | $1,412 |
| Snowball (smallest balance first) | Card C, month 7 | 1 yr 11 mo | $1,587 |
| Minimum payments only (3%, at 20.99%) | — | 24 yrs 10 mo | $10,193 |
Example balances: Card A $2,000 at 22.99%, Card B $4,000 at 19.99%, Card C $1,500 at 12.99%. Each month every card gets its minimum (3% or $10), and the rest goes to the target card.
Should I use a balance transfer?
It can help if you can pay the balance off before the promotional rate ends. Count the transfer fee, usually a percentage of the amount moved, and avoid new purchases on that card, which may not get the low rate.
Use the balance transfer calculator to compare the fee and promotional rate against staying put.
Would a low-interest credit card help?
Yes, if you can’t clear the balance quickly. The lowest-rate cards we track with an annual fee of $40 or less charge 10.9%, 10.99%, 12.9% on purchases, about half a typical 20.99% card.
| Card | Purchase rate | Annual fee |
|---|---|---|
| TopDesjardins Flexi Visa | 10.9% | $0 |
| MBNA True Line Gold Mastercard | 10.99% | $39 |
| TD Low Rate Visa | 12.9% | $25 |
Is a debt consolidation loan a good idea?
It can be: one fixed payment at a lower rate, with a set end date. It only works if you don’t run the cards back up. Compare the loan’s APR, including fees, against your card rates.
Where can I get help if I can’t keep up?
Talk to your card issuer first; some offer payment plans. A credit counsellor can help you make a budget and may set up a debt management plan. Check an agency’s reputation and fees first. For serious problems, a licensed insolvency trustee can explain consumer proposals and bankruptcy, usually with a free first assessment.
Be wary of companies promising to erase debt or repair credit quickly: if it sounds too good to be true, it probably is.
Keep reading
DebtShould You Pay Off Debt or Invest in Canada?Paying off debt is a guaranteed return equal to its interest rate. How to compare that with saving or investing, which debts to pay first, and when doing both makes sense.
DebtCredit Counselling and Debt Management Plans in CanadaA credit counsellor can help with a budget or set up a debt management plan: one monthly payment, often with interest reduced or removed. How it works, what it costs, and how to choose a reputable agency.
DebtWhat Happens If You Miss a Credit Card Payment in Canada?What happens after a missed credit card payment in Canada: interest on your purchases, a possible rate increase (on one big-bank card, 5 points, from 19.99% to 24.99%), a late payment on your credit report, and how to fix it quickly.- DebtHow to Pay for the Holidays Without Credit Card Debt in CanadaSet a holiday budget, spread the cost, and if it ends up on your credit card, what it costs to pay off: $1,500 at 20.99% is interest-free if paid in full, but costs $175.95 over 12 months and $1,802.67 on minimum payments.
Official sources and further reading
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