Bank card debt in Canada
In case your final bank card assertion dampened your seasonal pleasure, you’re not alone. In keeping with TransUnionshopper bank card debt rose 1.95% yr over yr in 2025, with even greater jumps for mortgages, strains of credit score, and auto loans. Wealthsimple stories that Canadians maintain a median of $4787 in bank card debt, which may take time to repay. And all of the whereas bank card curiosity accumulates.
Mark Kalinowski, a Monetary Educator on the Credit score Counselling Societyfactors to compound curiosity, or “the curiosity paid on the curiosity.” Whenever you pay solely the minimal quantity due or lower than the total stability, curiosity accumulates. You must pay curiosity on that quantity as properly. “This could create a debt entice the place money circulate is used to pay debt for lengthy durations of time,” he warns. “Even small quantities borrowed can take many years to repay.”
“New 12 months’s” offers to be careful for
Listed below are some frequent promotions that may trigger extra hassle than they’re value.
Steadiness switch
A stability switch is whenever you transfer debt from one credit score account to a different, normally with decrease curiosity. There’s sometimes a stability switch charge, normally 3–5%, so when you transfer $10,000 with a stability switch charge of three%, you’d pay $300. Promotional affords normally embody a low rate of interest for a restricted time, and can typically forego the stability switch charge.
Canada’s greatest bank cards for stability transfers
Learn the effective print
Shifting debt from a high-interest card to 1 that expenses much less generally is a nice technique when achieved proper. Search for a 0% stability switch charge, and make sure that the promo interval is lengthy sufficient to repay your debt. Additionally, discover out what occurs when you miss a cost to keep away from pricey issues.
Think about you switch $15,000 in debt to a card with a 19% common rate of interest and a 0% curiosity promotional interval for six months. To see how a stability switch promotion might truly damage your backside line, Malinowski picks up the story: “They plan to pay $2,500 per thirty days to pay it off in time however after making the primary two funds, they miss one.” This could set off a $50 late charge and cancel the promotional charge, he says. Now, you’ve gotten a stability of $12,050 on a card charging 19%, which comes out to about $190 in curiosity per thirty days. “It should take 5 extra months to repay the debt, and the overall additional value from curiosity and charges might be roughly $1,000,” he says.
Signal-up bonus
Signal-up bonuses promise a reward whenever you get a brand new bank card. Frequent rewards are boosted cash-back charges or bank card factors, however typically there are different perks like a first-year annual charge waiver.
Article Continues Under Commercial
X
Learn the effective print
An indication-up bonus generally is a useful perk, but it surely’s a poor technique for paying down debt. Bonuses are normally non permanent (like a excessive money again charge) or one-time (like an annual charge waiver or present of rewards factors). Not all playing cards allow you to apply factors to your credit score stability, and even when they do, the worth gained’t seemingly be sufficient to clear your debt.
You possibly can at all times earn extra by spending on the cardboard, however that defeats your purpose of debt discount. Additionally remember that each time you open a brand new credit score account, it impacts your credit score rating.
What to do if a credit score supply didn’t work out
In case you accepted a credit score supply and it’s not serving to you pay down your debt, there are some things you are able to do.
- Take motion. Don’t be paralyzed by monetary stress. Assessment your funds instantly (with a credit score counsellor, if you want) and make a plan.
- Take into account lower-interest bank cards. Bank card rates of interest may be as excessive as 25%. Trim compound curiosity by transferring your debt to a low-interest bank card.
- Take into account consolidation. Mix your debt into one mortgage with a manageable cost, ideally at a decrease rate of interest. In case you go this route, make sure that you additionally regulate your bank card utilization going ahead.
Easy methods to sort out debt with out utilizing extra credit score
“Getting new credit score merchandise with out closing outdated ones can result in elevated debt masses over time,” Malinowski says, including that it is advisable to perceive the supply of your debt to work in direction of an answer. He recommends making a price range, chopping bills, and placing any additional in direction of your debt. Growing your revenue via a second job or aspect hustle can speed up your progress.
As tempting as a fast repair could appear, taking over extra credit score isn’t the pathway to actual monetary reduction. You possibly can’t borrow your manner out of final yr’s errors. By slowing down, studying the effective print, and specializing in a transparent compensation plan, you may flip January into a real reset—not simply one other cycle of debt.
Get free MoneySense monetary ideas, information & recommendation in your inbox.
