Bank card debt in Canada
In case your final bank card assertion dampened your seasonal pleasure, you’re not alone. In accordance with TransUnion, shopper bank card debt rose 1.95% yr over yr in 2025, with even larger jumps for mortgages, traces of credit score, and auto loans. Wealthsimple studies 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 Society, factors to compound curiosity, or “the curiosity paid on the curiosity.” Whenever you pay solely the minimal quantity due or lower than the complete steadiness, curiosity accumulates. It’s important to pay curiosity on that quantity as properly. “This may create a debt entice the place money movement is used to pay debt for lengthy intervals of time,” he warns. “Even small quantities borrowed can take a long time to repay.”
“New Yr’s” offers to be careful for
Listed below are some frequent promotions which may trigger extra bother than they’re price.
Steadiness switch
A steadiness switch is if you transfer debt from one credit score account to a different, often with decrease curiosity. There’s sometimes a steadiness switch price, often 3–5%, so in the event you transfer $10,000 with a steadiness switch price of three%, you’d pay $300. Promotional provides often embody a low rate of interest for a restricted time, and can typically forego the steadiness switch price.
Canada’s finest bank cards for steadiness transfers
Learn the tremendous print
Shifting debt from a high-interest card to at least one that expenses much less generally is a nice technique when executed proper. Search for a 0% steadiness switch price, and be certain that the promo interval is lengthy sufficient to repay your debt. Additionally, discover out what occurs in the event 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 steadiness switch promotion might really damage your backside line, Malinowski picks up the story: “They plan to pay $2,500 monthly to pay it off in time however after making the primary two funds, they miss one.” This may set off a $50 late price and cancel the promotional fee, he says. Now, you may have a steadiness of $12,050 on a card charging 19%, which comes out to about $190 in curiosity monthly. “It would take 5 extra months to repay the debt, and the overall additional value from curiosity and charges shall be roughly $1,000,” he says.
Signal-up bonus
Signal-up bonuses promise a reward if 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 price waiver.
Learn the tremendous print
An indication-up bonus generally is a worthwhile perk, nevertheless it’s a poor technique for paying down debt. Bonuses are often short-term (like a excessive money again fee) or one-time (like an annual price waiver or reward of rewards factors). Not all playing cards allow you to apply factors to your credit score steadiness, 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 bear in mind that each time you open a brand new credit score account, it impacts your credit score rating.
What to do if a credit score provide didn’t work out
If you happen to accepted a credit score provide 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. Evaluate your funds instantly (with a credit score counsellor, if you want) and make a plan.
- Think about lower-interest bank cards. Bank card rates of interest could be as excessive as 25%. Trim compound curiosity by transferring your debt to a low-interest bank card.
- Think about consolidation. Mix your debt into one mortgage with a manageable cost, ideally at a decrease rate of interest. If you happen to go this route, be certain that you additionally modify your bank card utilization going ahead.
Learn how to deal with debt with out utilizing extra credit score
“Getting new credit score merchandise with out closing outdated ones can result in elevated debt hundreds over time,” Malinowski says, including that you should perceive the supply of your debt to work in direction of an answer. He recommends making a finances, chopping bills, and placing any additional in direction of your debt. Rising your earnings via a second job or facet hustle can speed up your progress.
As tempting as a fast repair could seem, taking up extra credit score isn’t the pathway to actual monetary aid. You possibly can’t borrow your means out of final yr’s errors. By slowing down, studying the tremendous print, and specializing in a transparent reimbursement plan, you possibly can flip January into a real reset—not simply one other cycle of debt.
Get free MoneySense monetary suggestions, information & recommendation in your inbox.
