Tired of juggling credit card debt? Start by making a plan.

If you owe money on credit cards or other forms of consumer debt, then you know how hard it can be to pay them off. Making the minimum payment can take 25 or more years, and cost thousands in interest. If you really want to get out of debt, and you are willing to do the work, follow this plan.

Freeze Your Debt

Before you can eliminate your credit card debt you have to stop using them, and the best way to do that is with a budget. A balanced budget can reduce unnecessary expenses so that each pay period you have excess money you can use to pay down debt.

If you do not already have a budget, use this Credit Canada Budget Planner to create one.

Create a Payment Plan

If you only have one credit card, your plan is simple. Use the excess money from your budget to pay down your debt. But what if you have multiple debts with varying interest rates. How should you allocate the excess money you have each month for maximum results?

Wilfred’s Story

Wilfred is 30 years old and has been paying interest on consumer debt for over 10 years, ever since borrowing $1,000 for a big screen TV. Last year he received an offer from a well-known financial institution to consolidate all his credit card debts. The annual rate of interest was only 0.99% for the first year, plus a 1.5% upfront fee. Wilfred liked the interest rate and was sure he could pay off all his debts before the regular cash advance rate kicked in. He was wrong!

In addition to not paying off the consolidated debt, he added new debts and currently owes $20,000 as follows:

  • $3,500 on a car loan at 6.9% interest
  • $4,500 on a gaming computer at 19.9%
  • $12,000 on the consolidated credit card at 24.9%

Tired of living paycheque to paycheque, Wilfred is ready to take charge of his finances. He created a budget 3 months ago, stopped using his credit cards and allocates $650 each month to paying off his debts.

To make sure he was getting the maximum results, he used the Credit Canada Debt Calculator, a free online application that will tell you how long it will take you to be debt-free using 5 different debt repayment strategies, and how much you could save in interest.

Minimum Payment

Making the minimum payment is what Wilfred has done for the past 10 years, costing him thousands in interest.

If Wilfred continues to make only minimum payments, it will take over 25 years to pay off his debt and cost $51,406 in interest.

The Snowball

With this method you focus on paying down the debts with the smallest balances first, while continuing to make minimum payments on your other debts. This provides a phycological advantage as small debts are eliminated.  

Using the snowball approach, it will take Wilfred 3.9 years to pay off all his debts and cost $10,377 in interest. A savings of $41,029 in interest compared to making minimum payments.

The Avalanche

With this method, you focus on paying down the debts with the highest interest rates first, while continuing to make minimum payments on your other debts. This lowers over-all cost as the highest interest debts are eliminated first.

Using the avalanche approach, it will take Wilfred 3.7 years to pay off all his debt and cost $8,244 in interest. A savings of $2,133 in interest compared to the snowball method.

Consolidation Loan

With this method, you use your good credit rating to get a debt consolidation loan from your bank and roll all your debts into one easy payment. This will provide the best results, if you stop using your credit cards, and the worst result if you do not!

If Wilfred uses a consolidation loan with an interest rate of 8%, it will take 2.9 years to pay off his debt and cost $2,458 in interest. A savings of $5,786 in interest compared to the avalanche method.

Credit Canada’s Debt Consolidation Program

If your credit rating is not good and your bank turns you down for a debt consolidation loan, you can work with a credit counsellor at Credit Canada to set up a Debt Consolidation Program.

With this program, Wilfred will pay no interest and his monthly payments will be $463 for 4 years.


The avalanche method is the one Wilfred decided to use. It will help him pay off his debts in less than 4 years and save thousands in interest charges.

So why did he choose the avalanche method?

Wilfred has always paid his credit cards on time, so his good credit rating would not qualify him for Credit Canada’s debt consolidation program. He considered contacting his bank for a consolidation loan but decided against it out of fear he might start using his credit cards again.

If you are looking for some additional help and guidance on how to take control of your personal finances, take the MyWealth Records Financial Insights Self-Assessment. It will help you to identify and eliminate obstacles that could make it more difficult to achieve the goals and plans you make.

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