Credit card debt is a common challenge for many Canadians, and it can quickly get out of hand if it’s not managed carefully. High interest rates and minimum payments that barely reduce what you owe can lead to growing financial stress, making bills and expenses harder to handle. That’s why it’s important to deal with credit card debt as soon as possible. The longer it lingers, the more costly it becomes for your budget and your peace of mind.
In this blog, we’ll explore practical strategies and helpful methods to pay off your credit card debt more efficiently so you can avoid financial strain and become debt-free sooner.
Assess Your Financial Situation
Getting out of credit card debt starts with knowing exactly what you owe. To begin, collect all your credit card statements and write down each balance, interest rate, and minimum payment. This will help you see the full picture and identify which debts are costing you the most.
Next, add up your total credit card debt so you know the exact amount you're working to pay off. Then, calculate the total amount you’re currently paying each month toward these debts. This includes the minimum payments and any extra amounts you’ve been able to contribute.
Create a Realistic Budget
Once you know what you owe, the next step is to build a budget you can stick to. At Credit Canada, we teach a method for budgeting that aims to build financial stability not just now, but for years to come. It’s called sustainable spending and it’s the foundation of our financial coaching program, GOLD.
The goal is to create a system that helps you avoid debt and manage your cash flow effectively over time. Start by tracking your income and all your expenses, including small everyday costs. It's important to put your income, expenses and debt down in writing to track your spending behaviour. This will give you a clear picture of your finances, so you can see if your spending aligns with your goals and spot where you can cut back.
Be sure to allocate a specific amount in your budget for credit card repayment. Treat it like a regular monthly bill to prioritize it consistently. Paying more than the minimum (even by just a little) will help lower your balance faster and reduce the amount of interest you pay over time.
There are many online budgeting tools and apps that can help you establish a realistic spending plan for your income, including Credit Canada’s free Budget Planner. This tool will let you know when you are over or under budget, and how your spending compares to general spending guidelines so you can easily adjust.
Staying within your budget means being honest about what you can afford right now. It’s not about giving up everything you enjoy but about making intentional spending choices that support your goals.
Explore Debt Repayment Strategies
Now that you have a clear budget, it’s time to choose a repayment strategy that works for you. The key is to stop making scattered or irregular payments and instead focus your efforts with a structured plan. There are a few proven methods Canadians can use to pay down debt more efficiently.
The debt avalanche method is ideal if your goal is to save money on interest. With this method, you make minimum payments on all your debts, then put any extra money toward the one with the highest interest rate. Once that’s paid off, you move to the next highest. This strategy helps you tackle the most expensive debt first and can reduce the overall amount you repay.
If you’re someone who needs a motivation boost, the debt snowball method might be a better fit. With this approach, you pay off your debts in order of their balance size, starting with the smallest, while making minimum payments on all other debts. Once the smallest one is gone, you roll that payment into the next smallest debt. This can help build motivation as entire debts are eliminated. However, the approach can end up being more expensive overall, as you are prioritizing low balances over high interest rates.
You might also consider a balance transfer, which allows you to move high-interest credit card debt onto a card with a lower or 0% introductory interest rate for a set period. This can give you a break from high interest, but it’s important to pay attention to transfer fees and when the promotional rate ends. Make sure you have a plan to pay down the balance before the rate goes up.
Another option is a debt consolidation loan, which combines your credit card and other unsecured debts into a single loan with one monthly payment. This can make things easier to manage and potentially reduce your interest rate, but only if you’re able to stop using your credit cards while you pay off the loan. In addition, this option primarily depends on credit standing and debt-to-income ratio for approval, so it may not be available to everyone.
Each strategy has pros and cons, and what works best will depend on your goals, your budget, and how much debt you’re dealing with. The most important thing is to choose a method that’s manageable long term.
Increase Your Income
If your budget is stretched thin, finding ways to bring in extra income through part-time work or a side hustle can help speed up your debt repayment. This could include doing simple tasks like bagging groceries, babysitting for friends and family, or walking dogs on weekends. You can also try out gigs like driving for Uber or offering your handyman skills on a website like Jiffy. If you have a talent of your own – like knitting scarves or designing jewelry, for example – consider selling those items online or at local craft markets to boost your income.
You can also look around your home for items you no longer use or need. Selling gently used clothing, electronics, and furniture through platforms like Facebook Marketplace and Kijiji can bring in some quick cash. Every dollar you earn from these efforts can be put directly toward your credit card debt, helping you pay off your debt faster and save on interest.
Reduce Your Expenses
Reducing your day-to-day spending is one of the most effective ways to free up money for debt repayment. The key is to spend with intention and identify expenses that don’t support your long-term financial goals. This doesn’t mean eliminating everything you enjoy, but it does mean being more intentional with your spending.
The most fundamental principle of personal finance is that you need to live within your means. Sustainable spending is all about understanding where your money goes to make sure you're staying within your budget over time. The approach has three phases: Analyze, Brainstorm and Change – or A-B-C.
When it comes to reducing your expenses, analyze your budget to see where your money is going. Then, brainstorm ways you could spend less – maybe by cutting back on dining out or cancelling unused subscription services. Once you’ve done these two steps, it’s time to commit to some of the small changes identified while brainstorming. Even trimming $50–$100 a month from your budget can make a noticeable difference in how quickly you pay off your credit card debt.
Negotiate with Creditors
If you're finding it hard to manage your credit card payments, consider contacting your credit card companies to ask about lower interest rates or alternative payment plans. Many creditors are willing to work with you if you're upfront about your situation. A lower interest rate can reduce the total amount you owe and help you pay off your balance faster. You can also ask about setting up a fixed monthly payment plan that better fits your budget, instead of continuing with the standard minimum payments that keep you in debt longer.
If you're struggling due to a job loss, illness, or another unexpected event, be sure to ask if the company offers a financial hardship program. These programs are designed to help during difficult times and may include options like temporarily reduced payments, pausing interest charges, or deferring payments for a set period. These supports aren’t always advertised, so you’ll need to ask. In many cases, creditors will be more willing to offer flexible solutions if you take the first step.
Seek Professional Help
If your credit card debt feels unmanageable, consider speaking with a non-profit credit counselling agency like Credit Canada. Our certified credit counsellors offer free, personalized advice tailored to your situation. They can help you understand your options, answer your questions, and work with you to find the best debt relief solution to help you regain control of your finances.
Depending on your circumstances, one option they may suggest is a Debt Consolidation Program (DCP, also often referred to as a Debt Management Plan), which can help simplify debt repayment. A DCP combines your unsecured debts like credit cards into one monthly payment and reduces or eliminates interest charges through agreements with your creditors. This makes it easier to afford payments and can lead to faster debt relief.
Stay Committed and Monitor Progress
Paying off credit card debt takes time, so it’s important to stay committed and regularly check in on your progress. Review your budget every month and adjust it as needed, especially if your income changes or you notice new spending habits forming. Tracking your progress can help you see how far you've come, even if the changes are small.
It can be helpful to celebrate small wins along the way, like paying off a single credit card or reducing your overall balance by a certain amount. These milestones keep you motivated, especially when the process feels slow. Remember to avoid taking on new debt while you’re paying down your existing balances. This might mean leaving your credit cards at home, removing them from online shopping accounts, or using a prepaid card for everyday purchases.
When things get tough, it’s important to remember your why. What’s your inspiration for wanting to get out of debt? Maybe you want a better life for your family, or maybe you want to be debt-free before you retire. Whatever your reason, keeping it top of mind and making intentional choices with your money will ensure long-term success.
Take Charge of Your Finances
Tackling credit card debt isn’t just about making payments – it’s about having a clear plan and taking intentional steps to support your long-term goals. By budgeting wisely, choosing the right repayment strategy for you, and exploring ways to boost income, you can make steady progress and take control of your financial future.
If you need support, our certified credit counsellors can provide a step-by-step plan to help you become debt-free. Contact us today by calling 1(800)267-2272 or talk to our AI Agent, Mariposa.
