Credit Card Debt in Canada: How to Get Relief and Rebuild

Short Answer: How Do You Get Out of Credit Card Debt in Canada?

To get out of credit card debt in Canada, you need a clear plan to lower interest, reduce your balance, and protect your cash flow. Depending on your situation, that plan might include:

• Creating a budget and using the debt snowball or debt avalanche method.
• Using a debt consolidation loan or line of credit.
• Working with a non-profit credit counselling agency on a Debt Management Plan.
• Filing a consumer proposal to legally reduce your unsecured debt.
• In severe cases, filing bankruptcy for a fresh start.

The Financial Consumer Agency of Canada (FCAC) offers general guidance on managing debt and credit cards here:

• Managing Debt – Canada.ca
• Paying Off Your Credit Card – Canada.ca

What Is Credit Card Debt in Canada?

Credit card debt is a revolving balance on one or more credit cards that you do not pay off in full by the due date. In Canada, most cards charge relatively high interest rates on unpaid balances, often higher than other types of consumer debt.

Credit cards can be useful tools if used carefully, but they become dangerous when:

• You carry balances month after month.
• You only make minimum payments or slightly more.
• You use credit cards to cover everyday expenses you cannot afford in cash.

For an overview of how credit cards work, see: Credit Cards – Canada.ca.

Warning Signs Your Credit Card Debt Is a Problem

Even if you’re not behind on payments yet, you may already be in trouble with credit card debt in Canada if:

• You can only afford the minimum payment most months.
• You are using one card to pay another or taking cash advances to cover bills.
• Your cards are near or at their credit limits.
• You are avoiding opening statements or answering calls from creditors.
• Your debt is causing stress, anxiety, or trouble sleeping.

If you see several of these warning signs, it’s time to explore credit card debt relief options, not just “try harder” with the same approach.

Why Credit Card Debt Is Especially Expensive

Credit card debt is often the most expensive form of consumer debt because:

• Interest rates are usually much higher than on mortgages, lines of credit, or car loans.
• Interest compounds daily, so balances can grow quickly if you only make minimum payments.
• Fees (late fees, over-limit fees, cash advance fees) can add up and make it even harder to pay down your balance.

The FCAC offers tools to understand how your payments affect your payoff timeline, including a Credit Card Payment Calculator that lets you see how long it takes to pay off your balance with different payment amounts.

Top Options for Credit Card Debt Relief in Canada

There is no “one-size-fits-all” solution. The right approach depends on your income, total debt, credit score, and goals. Here are the main credit card debt relief options in Canada, from least to most drastic.

1. DIY Budgeting & Debt Repayment Strategies

If your balances are still manageable and you have some room in your budget, you might be able to handle credit card debt on your own by:

• Building a realistic monthly budget.
• Cutting non-essential expenses and redirecting that money to debt.
• Using the debt snowball (pay smallest balance first) or debt avalanche (pay highest interest rate first) method.

For general guidance on building a debt repayment plan, see resources such as:

• Managing Debt – FCAC
• 4 Tips to Pay Off Credit Card Debt Faster – RBC

2. Balance Transfers or Lower-Interest Credit Products

Some people reduce interest costs by:

• Using a low-rate credit card or balance transfer promotion.
• Using a personal line of credit at a lower interest rate than their cards.

This strategy can help, but only if:

• You stop using your old cards for new purchases.
• You have a plan to pay off the new lower-interest balance, not just stretch it out.

3. Debt Consolidation Loan or Line of Credit

Debt consolidation involves taking a new loan (or using a line of credit) to pay off multiple credit cards, giving you:

• One monthly payment instead of many.
• A lower overall interest rate (if you qualify).

To learn more about this option, see our guide: Debt Consolidation in Canada.

4. Non-Profit Credit Counselling and Debt Management Plans

If you cannot qualify for a consolidation loan, a non-profit credit counselling agency may help you by:

• Creating a workable budget.
• Setting up a Debt Management Plan (DMP), where you make one monthly payment and creditors may reduce interest.

In Canada, you can learn more from:

• Getting Help from a Credit Counsellor – FCAC
• Credit Counselling Society – NoMoreDebts.org

We also explain this option in our Credit Counselling and Debt Management guides.

5. Consumer Proposal (Legally Reduce Credit Card Debt)

A consumer proposal is a formal, legally binding settlement filed by a Licensed Insolvency Trustee, where you:

• Offer to repay only a portion of what you owe on credit cards and other unsecured debts.
• Make one monthly payment for up to 5 years, with no interest.
• Are protected from most lawsuits, wage garnishments, and collection calls once the proposal is filed and accepted.

Credit card balances, lines of credit, payday loans, and many other unsecured debts can be included. Learn more here: Consumer Proposal in Canada.

6. Personal Bankruptcy (Last Resort for Credit Card Debt)

When credit card debt and other obligations are completely unmanageable, personal bankruptcy may be the most effective solution. Bankruptcy:

• Provides a legal stay of proceedings that generally stops most collection actions and garnishments.
• Can eliminate most unsecured debts, including credit card balances, at discharge.
• Has serious consequences for your credit and may involve non-exempt assets, but it can also give you a true fresh start.

For an in-depth explanation, see Personal Bankruptcy in Canada and our page on the Advantages of Bankruptcy.

Comparing Credit Card Debt Relief Options

How to Choose the Right Option for You

Here is a simple framework to decide how to deal with credit card debt in Canada:

1. List all your debts. Include balances, interest rates, and minimum payments for credit cards and other debts.
2. Build a realistic budget. Compare your total debt payments to your available income after essential living costs.
3. Test DIY solutions. See if you can pay off your cards in 3–5 years using a snowball or avalanche strategy.
4. Explore consolidation. If your credit is still good, check whether a consolidation loan or line of credit would reduce interest enough to solve the problem.
5. Talk to a credit counsellor. A non-profit agency can help you evaluate a Debt Management Plan and other options.
6. Consult a Licensed Insolvency Trustee. If your debt is too large or you are facing collections or garnishments, a LIT can explain consumer proposals and bankruptcy, including costs and long-term effects.

If you’re not sure where to start, our Debt Relief in Canada hub gives an overview of all these options in one place.

How to Prevent Future Credit Card Debt

Getting out of credit card debt is only half the battle. Staying out of debt means:

• Using a monthly spending plan that fits your income.
• Building an emergency fund so you don’t rely on credit for unexpected expenses.
• Paying your credit card in full each month whenever possible.
• Regularly reviewing your statements for errors and spending patterns.
• Limiting the number of cards you carry and lowering credit limits if needed.

FCAC offers financial basics videos and tools to help you build better credit habits: Dealing with Debt – FCAC Financial Basics.