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How to get out of credit card debt

Follow these 8 practical and simple steps to pay off your credit card debt for good.

While it may seem hard to believe, by the end of 2020, the total consumer debt in Canada was over 2 trillion dollars. If you’re one of the many Canadians struggling with credit card debt, having a debt relief plan strategy is the best way to move towards a debt-free life.

Learn how to pay off credit card debt by following these 8 straightforward tips and take your first steps to reclaiming your financial freedom.

8 ways to get rid of your credit card debt

These 8 steps are designed to help you get out of credit card debt and on the path to financial freedom – but even following them one at a time will help you along the way.

1. Avoid making new purchases

To get rid of your debt, you have to stop adding to it. Stop spending and start using that money to pay down your existing balance. Remember that your ultimate goal is to be debt free. You can treat yourself again once you’ve achieved that.

2. Calculate the total amount of money you owe

It’s time to face the hard truth. This process might be painful, but it’s necessary and short-lived. Get all your account balances together and make a list. Include your debt amounts, the interest you’re paying on each of those amounts and any other charges. Add them up and take a good, long, hard look before you say your goodbyes.

3. Create a budget

Start with your monthly income and figure out your essential monthly expenses. It’s time for tightening measures, so expenses should include only the bare necessities such as bills, groceries, gas and other living expenses you need. After establishing your income and expenses, it’s time to create a monthly schedule for repaying your debts. Work out how much you can pay off each month, but be realistic and leave breathing room for any emergencies.

4. Pay off your credit cards one at a time

With over 76 million Visa and Mastercard credit cards in circulation throughout Canada, it’s safe to say that this tip will apply to many people. If you’re holding more than one credit card with a balance on it, it’s a good idea to pay the balance with the highest interest rate first, as this balance will cost you the most in interest repayments over time – makes sense, right?

While you’re working at paying this balance down, it’s essential that you make the minimum repayments on your other balances. When you’ve paid down the first debt, then move onto the balance with the next highest rate of interest and so on.

5. Set up automated payments

Using your budgeted monthly payment amount, set up automated payments to make sure you actually pay what you plan to. Set up the payments to come out of your bank account the day after you get paid — this is a sure-fire way to stay committed to your budget.

6. Contact your credit card provider

If you’re feeling overwhelmed by your debt, it might be worthwhile to appeal to your credit card provider for a renegotiation of terms. Creditors are sometimes willing to allow a temporary postponement of payments or a slightly more favourable interest rate. Generally, they would rather give you a discount than risk you defaulting on your debt.

7. Apply for a debt consolidation loan

A debt consolidation loan allows you to consolidate your debt into one monthly payment, often at a reduced interest rate. A consolidation loan can be a great way to save you money by paying less in interest, and can make paying back your debts more manageable. Debt consolidation loans are a good option if you plan to pay back your unsecured debt over several years.

8. Consider a balance transfer credit card

Balance transfers can buy you time to repay your debt without incurring any more interest. This is because balance transfer credit cards offer low or 0% interest on your transferred debt for a promotional period of time – sometimes for as long as ten months. This might be exactly what you need to get rid of that debt more quickly, not to mention what you’ll save on interest fees that add hundreds– or thousands – of dollars to your debt every year.

Debt consolidation options

Compare debt consolidation loans

Name Product Interest Rate Loan Amount Loan Term Requirements Credit Score Link
goPeer Personal Loan
8.00% - 33.92%
$1,000 - $25,000
36 - 60 months
Recommended income of $40,000 /year
Min. credit score: 600
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Canada's first regulated consumer peer-to-peer lending platform offering unsecured loans. Connects creditworthy Canadians looking for a loan with Canadians looking to invest. goPeer strives to offer the most competitive interest rates. Apply in minutes and get a response within 24 hours.
OFFER
Mogo Personal Loan
9.90% - 46.96%
$200 - $35,000
6 - 60 months
Min. income of $13,000 /year
Min. credit score: 500


Mogo offers a 100-day money-back guarantee. If you're not happy with your loan, pay back the principal and get your 100 days of paid interest and fees back.
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An online lender who aims for a hassle-free process through same-day unsecured loan approval and funding. Get a loan fast and track your credit score for free.
SkyCap Financial Personal Loan
12.99% - 39.99%
$500 - $10,000
9 - 36 months
Min. income of $1,200 /month, stable employment
Min. credit score: 550
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More Info
An online lender offering unsecured personal loans to borrowers with a wide range of credit scores. Apply in less than 5 minutes and if approved, receive financing in as little as 24 hours.
Loans Canada Debt Consolidation Loan
Secured from 2.00%, Unsecured from 8.00% to 46.96%
$300 - $50,000
3 - 60 months
No min. income or employment requirements
Min. credit score: 300
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More Info
LoanConnect Debt Consolidation Loan
5.99% - 47.42%
$500 - $35,000
12 - 60 months
No min. income or employment requirements
Min. credit score: 300
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More Info
LoanConnect is an online broker that matches borrowers to lenders offering debt consolidation loans in amounts up to $35,000. Get approved for multiple loan offers from different lenders, no matter your credit score.
Fairstone Debt Consolidation Loan
19.99% - 39.99%. Varies by loan type and province
$500 - $50,000
6 - 120 months
Able to make monthly repayments on your loan
Min. credit score: 560
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More Info
Consolidate your debt up to $20,000 for an unsecured loan and $50,000 for a secured loan.
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Compare balance transfer credit cards

Name Product Balance Transfer Rate Balance Transfer Fee Purchase Interest Rate Annual Fee Min. Credit Score Description
Scotiabank Value Visa Card
0.99% for the first 6 months (then 12.99%)
N/A
12.99%
$29
Min. recommended credit score: 660
Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by February 28, 2022.
BMO CashBack Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 660
Get 5% cash back on all eligible purchases in the first three months of card membership (up to max. spend of $2,000). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
Tangerine World Mastercard
1.95% for the first 6 months (then 19.95%)
3%
19.95%
$0
Min. recommended credit score: 600
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until January 31, 2022. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
BMO Preferred Rate Mastercard
3.99% for the first 9 months (then 12.99%)
1%
12.99%
$20
Min. recommended credit score: 660
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
Tangerine Money-Back Credit Card
1.95% for the first 6 months (then 19.95%)
3%
19.95%
$0
Min. recommended credit score: 600
Earn an extra 15% cash back (up to $150) on up to $1,000 of everyday purchases in the first 2 months Until January 31, 2022. Plus, get a 1.95% interest rate on balance transfers for the first 6 months (valid within the first 30 days of account opening, 1% transfer fee applies).
BMO Rewards Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 725
Get a bonus of 10,000 BMO Rewards points when you spend $1,000 in the first 3 months. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO AIR MILES Mastercard
1.99% for the first 9 months (then 22.99%)
1%
19.99%
$0
Min. recommended credit score: 660
Get 800 AIR MILES Bonus Miles (enough for $80 towards purchases with AIR MILES Cash). Get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
Scotia Momentum No-Fee Visa Card
1.99% for the first 6 months (then 22.99%)
N/A
19.99%
$0
Min. recommended credit score: 660
Earn 5% cash back on all purchases for the first 3 months (up to $2,000 in total purchases). Plus, get a 1.99% introductory interest rate on balance transfers for the first 6 months with no balance transfer fee. Apply by January 1, 2022.
Scotiabank Gold American Express Card
0% for the first 6 months (then 22.99%)
1%
19.99%
$0 annual fee for the first year ($120 thereafter)
Min. recommended credit score: 700
Earn up to 40,000 bonus Scene+ points in your first year (that's up to $400 towards travel) and no annual fee in the first year, including supplementary cards. Plus, get a 0.00% introductory interest rate on balance transfers for the first 6 months (A 1% balance transfer fee applies). Apply by January 1, 2022.
Scotia Momentum Visa Card
2.99% for the first 6 months (then 22.99%)
N/A
19.99%
$39
Min. recommended credit score: 660
Get a 2.99% introductory rate on balance transfers and a 0% balance transfer fee for the first 6 months. Apply by February 28, 2022.
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Compare up to 4 providers

How to pay off multiple credit card debts

While it’s generally recommended that you pay off your highest interest rate debts first, that’s not the only way to. manage multiple credit card debts. Consider all of these options for getting out credit card debt with multiple cards.

  • Consolidate your debts onto one card. This follows on from step 7, where you can consider a balance transfer credit card to help with your debt consolidation. As well as giving you the opportunity to save money on otherwise expensive interest fees for a promotional period of time, you can also focus on only paying off one account. It could also help you save on additional charges, such as annual fees.
  • Pay off the card with the highest interest rate first. You’ll save the most money by paying off the account with the highest interest rate first, followed by the account with the next highest interest rate and so on. Remember that you’ll still have to make minimum payments on your other cards during this time.
  • Pay off the card with the lowest balance first. For some people, paying off the card with the lowest balance first is more motivating. This strategy will reduce the number of outstanding accounts sooner and cuts down on interest charges in the process. Of course, you’ll also need to make minimum payments on your other cards at the same time.

Read our complete guide to balance transfer cards

Other tips to help get rid of credit card debt

In addition to the steps above, following these tips can also prove very helpful:

  • Switch to a card with a lower annual fee. This helps with reducing overall expenses, but can be doubly effective when combined with a balance transfer offer. If you want to minimize your outgoing card fees, you should consider a no fee balance transfer credit card.
  • Cancel cards you don’t use. This tip will help save on annual fees and other charges that you may be paying on your cards. Also, this will help reduce the temptation to spend more money.
  • Use your savings. Since your savings account could never offer an interest rate as high as the one you’re probably paying on your credit card, it follows that you should be using your savings to pay off your credit card debts. Use the cash under your bed, that rainy-day fund and every penny you can find to pay off those debts – because they’ll just swell up with interest if you don’t. Once they’re paid off, you’ll have more money you can put towards your savings to build them up again.
  • Make weekly payments. Even though your statement comes monthly, credit card interest is actually calculated on a daily basis. This means that increasing the frequency of your payments can help to reduce the total interest you pay over time. Whenever you have an extra dollar, consider paying off more of your credit card balance.
  • Seek professional help. Gaining control over your debts can be very difficult, especially at the beginning and it can be helpful to get professional advice. You can often find a range of free services online for debt management.

What to do if you’re overwhelmed

If you’re in over your head and need some help gaining ground, here are some additional tips for getting out of credit card debt:

  • Call your issuer. If you’re experiencing trouble repaying your debts, your issuer is often more than willing to help you figure out a plan to get you back on track. Alternate payment plans or adjusted interest rates are just a few of the outcomes that can help you out. And besides, it never hurts to ask.
  • Seek professional help. Gaining control over your debts can be very difficult, especially at the beginning. It can be helpful to get professional advice and there are even a range of free services for debt management that you can consider.
  • Use your savings. Since your savings account could never offer an interest rate as high as the one you’re probably paying on your credit card, it follows that you should be using your savings to pay off your credit card debts. Use the cash under your bed, that rainy-day fund and every penny you can find to pay off those debts, because they’ll just swell up with interest if you don’t. And once they’re paid off, you’ll have more money you can put towards your savings.

Bottom line

Credit card debt can often seem overwhelming, but by setting a budget, planning out your strategy and/or getting a debt consolidation loan or balance transfer card, you can get out of credit card debt and make lasting, sustainable changes to your financial life.

However, if after assessing your situation you still find yourself in a position where you don’t think you’ll be able to make meaningful progress toward paying off your debt, it may be time to consider debt relief as a solution.

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