8 Steps to Reducing Credit Card Debt

8 Steps to Reducing Credit Card Debt

Written by Caitlin Wood
Last Updated June 2, 2021

Credit card debt is one of the most common types of debt Canadians struggle with. Some reasons for this may be due to its high-interest rates and ease of obtaining a credit card. In Canada, the number of credit cards in circulation has been increasing since the early 2000s. Within the span of 20 years, the number of cards in circulation has doubled from 40 million to 80 million, according to Statistica.  

Given the increased use of credit cards amongst Canadians, it’s understandable that many have been accumulating more credit card debt. While not all debt is bad, too much credit card debt can negatively impact your credit score and overall finances. If you’re currently struggling to control your credit card debt, here are 8 ways you can take to reduce your credit card debt. 

Learn How to Tackle Debt

1. Put Your Credit Cards Aside

The most obvious step is to stop using your credit cards until you regain financial control. Putting your credit cards in a drawer, away from sight, will curb your temptation to buy things that you don’t have the money to buy in cash. Moreover, you’ll offset any attempt to reduce your debt if you continue to make purchases on your credit card. Those who have suffered enough or get easily influenced must stop using credit cards immediately. The world still runs fine without them so just lock them up and don’t go looking for them.

2. Pay Less as Interest

When you miss your credit card payments, you have to pay interest on the balance owed. With interest rates averaging around 20%, your balance owed will end up accruing interest at a scary pace.  In such circumstances, you should consider a balance transfer. A balance transfer involves moving your current credit card debt to another credit card. However, with a balance transfer, the rate on your new credit card is usually very low, sometimes as low as 0% for a period of time. 

You can also try calling your credit card issuer and request an interest rate reduction. Some banks may entertain your request to reduce the interest rate if you’ve been a loyal client with a good payment history

Here’s what you can do if you’ve maxed out your credit cards

3. Pay More Than The Minimum Payment

While paying the minimum amount on your credit card can save you from late fees, you’ll still be charged interest on the balance owed. This is one of the main ways Canadians get caught in the minimum payment trap. The best way to pay off your credit card is by paying at least a little more than the minimum payment. So, if your minimum payment is $10, trying putting in $100 instead. The difference will astound you. 

For example, a credit card balance of $2,000 with an interest rate of 18% will take you approximately 14 years to pay off with minimum payments only, while $100 payments would take you 2 years only. Moreover, you’ll save $1,403 dollars in interest. 

4. The Avalanche Method

Speaking of minimum payments, a well-known strategy to pay off debts is by using the Avalanche Method. It involves making minimum payments on all your debts and then focusing all your extra money on the debt that has the highest interest. Once you’ve paid it off, you move onto the next debt that has the highest interest, while still making minimum payments of the rest of your debts. By paying off one debt at a time, you’ll free up more money for the next debt you target. 

Learn more on how to consolidate your credit card debt.

5. Consolidate Your Debt

One of the most popular ways of reducing credit card debt is by consolidating your debt with a personal loan or a line of credit. The goal of a consolidation loan is to: 

  • Reduce your interest rate. 
  • Lower your monthly payments by increase term length.
  • Simply your payments by having only one payment to deal with. 

Problem is, if you have bad credit you may not qualify for a low rate and may need a cosigner or an asset to help you secure the loan. 

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6. Revaluate Your Budget 

When you’re trying to pay down debt, it’s important to evaluate your budget and see where you can cut costs. Tracking your money and putting any extra funds towards your credit card debt is essential to reducing it. You can also use budgeting apps to help you create a budget and timeline on how you plan on paying your debt. These tools will help you track your progress and give you the motivation necessary to keep going. Moreover, a big goal can feel overwhelming, breaking it down into small monthly goals is a more realistic and motivating way to achieve your goal. 

7. Seek Professional Help

Making an appointment with a credit counsellor is a huge step to attaining financial freedom. Credit counsellors help individuals take control of their debt by evaluating their financial situation and offering debt relief solutions. These trained professionals typically start by evaluating your debt and budget. Depending on your financial situation, you may be able to find a solution through a mere adjustment of your budget. However, in more severe cases, you may be suggested other debt relief programs such as:

debt management options

8. Avoid Guilt, Stay motivated

Motivation is key to reducing your credit card debt. Long-term goals can often fail due to the time, effort, and discipline, it takes. Be ready to make changes in your attitude and your lifestyle in order to see things through. Moreover, by actively changing your habits, you’re less likely to fall into debt in the future. 

Learn more about how credit cards affect Canadians.

Bottom Line

If you’re struggling with credit card debt, you’re not alone, many other Canadians struggle with it as well. Just remember, that there are many debt relief solutions out there, you simply need to choose one that best suits your financial situation and then stick with it.  In the end, you’ll come out in control and free of debt.


Rating of 5/5 based on 3 votes.

Caitlin is a graduate of Dawson College and Concordia University and has been working in the personal finance industry for over eight years. She believes that education and knowledge are the two most important factors in the creation of healthy financial habits. She also believes that openly discussing money and credit, and the responsibilities that come with them can lead to better decisions and a greater sense of financial security. One of the main ways she’s built good financial habits is by budgeting and tracking her spending through the YNAB budgeting app. She also automates her savings so she never forgets to put aside a portion of her income into her TFSA. She believes investing and passive income is key to earning financial freedom. She also uses her Aeroplan TD credit card to collect Aeroplan points so that she can save money when she travels.

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