Credit card debt is expensive because card interest rates are high and minimum payments are set low, so a balance paid at the minimum can take decades to clear. Getting out comes down to three things: paying more than the minimum every month, putting the extra money where it saves the most, and not adding new balances while you pay down the old ones. This page sets out a plan, the tools that lower the interest cost, and where to get help. How cards charge interest and fees is covered across our credit card basics guides.
Step 1: List what you owe
For each card, note the balance, the interest rate and the minimum payment from the latest statement. The total tells you the size of the problem; the rates tell you where interest is costing most. Your statement also shows how long the balance would take to clear at the minimum alone, and credit card minimum payments explains why that estimate is so long.
Step 2: Pay more than the minimum, in a set order
Every dollar paid above the minimum goes to the balance. With more than one card, the usual approaches are:
- Avalanche: minimums on every card, and all extra money to the card with the highest interest rate. This costs the least in interest.
- Snowball: minimums on every card, and all extra money to the smallest balance. Clearing whole balances sooner can make the plan easier to keep going.
Debt avalanche vs snowball compares the two with worked examples, and the debt payoff calculator shows the payoff date and interest for your own balances under either method.
Step 3: Find money for the extra payments
Extra payments usually come from trimming regular spending, putting windfalls such as a tax refund or bonus toward the balance, or extra income. A budget makes the amount clear; the budget calculator is a starting point. Using the cards for new purchases while paying them down works against all of this.
Step 4: Lower the interest rate
A lower rate means more of each payment reduces the balance.
- Balance transfer. Moving the balance to a card with a promotional rate can cut the interest for the promotional period, after a transfer fee. The balance transfer calculator works out whether a transfer saves money after the fee, and our balance transfer card picks compare the offers. A balance left when the promotion ends is charged the card’s regular rate.
- Consolidation. A personal loan or line of credit at a lower rate can replace several card balances with one payment; debt consolidation loans covers how they work, and line of credit vs credit card compares the costs.
- Asking the issuer. An issuer can lower the rate on an existing card, and some will on request, especially for a customer with a good payment record; what counts as a good credit card interest rate covers asking.
Step 5: If payments are getting hard to make
Falling behind adds fees, can raise your rate and damages your credit; what happens if you miss a credit card payment covers each consequence. The Financial Consumer Agency of Canada’s advice is to “contact the lender right away if you think you’ll have trouble paying a bill.” Some issuers offer hardship arrangements.
When the debt is beyond what a plan can handle, there are formal options:
- Credit counselling. A non-profit credit counsellor can review your budget and may set up a debt management plan with your creditors; see credit counselling in Canada.
- A consumer proposal or bankruptcy, filed through a Licensed Insolvency Trustee, which legally reduce or clear unsecured debts; the consumer proposals and bankruptcy guide compares them. Both stay on your credit report for years, as set out in how long bankruptcy and consumer proposals stay on your report.
After the balance is gone
Keeping a paid-off card open, especially an older one with no annual fee, keeps its limit counting toward your available credit; does closing a credit card hurt your credit score explains why. Paying the full statement balance each month from then on means purchases cost nothing in interest. For debt beyond credit cards, the debt payoff guide covers loans and lines of credit too.