In This Article
- Two Proven Debt Payoff Strategies
- The Avalanche Method (Mathematically Optimal)
- The Snowball Method (Psychologically Rewarding)
- Balance Transfer Cards in Canada
- Debt Consolidation Loans
- Your 6-Step Action Plan
- Frequently Asked Questions
- What is the fastest way to pay off credit card debt?
- Should I invest or pay off credit card debt first?
- Will paying off credit cards hurt my credit score?
- How can I negotiate a lower credit card interest rate?
Canadian credit card interest rates average 19.99–22.99% APR — among the highest borrowing costs available. If you carry a $5,000 balance at 20% and make only minimum payments, it takes over 30 years to pay off and costs over $12,000 in interest. Getting out of credit card debt is the single highest-return financial move most Canadians can make.
Two Proven Debt Payoff Strategies
The Avalanche Method (Mathematically Optimal)
Pay minimums on all cards, then put every extra dollar toward the card with the highest interest rate. Once that is paid off, move to the next highest. This method saves the most money in total interest.
The Snowball Method (Psychologically Rewarding)
Pay minimums on all cards, then put every extra dollar toward the card with the smallest balance. Quick wins build momentum and motivation. You pay slightly more total interest than the avalanche, but many people find it easier to stick with.
Balance Transfer Cards in Canada
Some Canadian credit cards offer 0% promotional rates on balance transfers for 6–12 months. Transfer your high-interest balance, pay it down aggressively during the promo period. Watch for transfer fees (1–3%) and the post-promotional rate (often 22%+). Popular options include MBNA TrueLine and Scotiabank Value Visa.
Debt Consolidation Loans
Personal loans from credit unions or banks at 8–12% can consolidate multiple credit card balances into a single, lower-interest payment. This simplifies your payments and saves on interest. Avoid high-interest “debt consolidation” companies that charge fees on top of the interest.
Your 6-Step Action Plan
- List all debts: balance, interest rate, minimum payment
- Stop adding new debt — put the cards in a drawer
- Choose avalanche or snowball method
- Automate minimum payments on all cards
- Direct every extra dollar to your target card
- After debt-free: build a $1,000 emergency fund, then start investing in your TFSA
Frequently Asked Questions
What is the fastest way to pay off credit card debt?
The avalanche method (targeting highest interest first) is mathematically fastest. Combine it with a balance transfer to a 0% promo card and aggressive payments during the promotional period.
Should I invest or pay off credit card debt first?
Pay off credit card debt first — always. No investment reliably earns 20%+ returns. Paying off a 20% APR credit card is equivalent to a guaranteed 20% return on your money.
Will paying off credit cards hurt my credit score?
No — it will improve it. Paying down balances lowers your credit utilization ratio, which is the biggest factor in your credit score after payment history.
How can I negotiate a lower credit card interest rate?
Call your card issuer and ask. If you have been a customer for 1+ years with a good payment history, many will reduce your rate by 2–5%. Mention competing offers from other banks as leverage.