August 05, 2025

How to Pay Off Credit Card Debt

Most Canadians rely on borrowing money, which includes using credit cards, to pay for essential purchases. And data shows that almost one third of those users cannot pay off the credit card balance in full each month. To some, this debt can quickly become a burden that affects their overall financial health.

Debt repayment, especially credit card debt, often becomes problematic when you don’t know how to approach it strategically. For example, you cannot only make minimum payments and expect to pay off the credit card balance in good time. This article is your guide on how to pay off credit card debt faster.

Key Takeaways 

  • Pay more than the minimum amount due to substantially reduce interest costs and shorten the repayment period.

  • Make all credit card payments on time to avoid late fees and penalty interest rates

  • Use installment plans to break down large balances into manageable fixed payments.

  • Take advantage of interest-free grace periods to avoid accumulating additional interest.

  • Create a consistent repayment strategy rather than making occasional large payments.

Make Timely Loan Payments

Buying things with credit cards is very convenient. However, you must remember that this is a loan that must be paid back when due. 

This is important for two reasons. First, a missed payment deadline incurs late payment fees. Second, the lender may raise the interest rate, which can significantly extend your debt repayment timeline. Paying on time consistently has several important benefits, including:

  • You avoid costly late payment fees.

  • You avoid a low credit score and protect your credit history.

  • You prevent higher interest rates.

  • You stay on track with your debt reduction plan.

Several tactics can help you make timely payments. First, you can leverage automatic payments. Many banks and financial institutions, including Innovation, offer autopay services, typically for free. Innovation allows you to configure your account to automatically transfer at least the minimum payment amount before each due date.

Second, take advantage of payment reminders. A typical credit card company in Canada will alert you via text message or email well in advance of the due date.

Pay More Than the Minimum Payment

Making the minimum payment on your credit card might seem financially responsible — after all, you’re chipping away at your debt and making timely payments.  The problem with making smaller payments is that it could take years to pay off your debt. Consider this comparison of making minimum versus higher payments:

Payment Approach

Monthly Payment

Time to Pay Off $5,000 Outstanding Balance

Total Interest Paid

Minimum Payment (2%)

$100 initially, decreasing over time

Approximately 25 years

$7,424

Fixed $200 Payment

$200

2 years, 9 months

$1,264

Fixed $300 Payment

$300

1 year, 8 months

$814

As you can see, paying just $100 more than the initial minimum payment can save you over $6,000 in interest costs. It can also help you become debt-free more than 22 years sooner. Every dollar you pay beyond the minimum goes directly toward reducing the principal credit card balance. This approach does two things: 1)  it shortens your repayment period, and 2)  it decreases the amount of interest you'll pay over time.

Break Down Large Balances with Installment Plans

Large sums of money can be intimidating, especially when we’re talking about debt. Thankfully, many financial institutions offer flexible payment plans that allow you to pay for large purchases with small installments.

Using these plans can help you take advantage of debt-paying tactics like the debt avalanche method and the debt snowball method. The debt avalanche method focuses on clearing the high-interest debt first before shifting to ones with lower interest rates. The debt snowball method takes a different approach; you pay off the smallest debt amount first and use the momentum to clear larger loans.

Leverage Payment Grace Periods Effectively

Most credit card issuers offer a “holiday period” for new card holders during which borrowers can repay the used credit card debt without accruing interest. For example, Collabria, our Visa issuer, offers a 21-day interest-free grace period on all of its credit cards. 

To maximize the benefit of grace periods, you must know how they work. When you pay the outstanding credit card debt in full by the due date, you won't be charged interest on new purchases made during the following billing cycle. As such, you can use this credit card account for necessary expenses while giving yourself nearly a month to arrange payment without interest accumulating.

Conclusion 

Managing credit card debt effectively is easy. Just make timely payments and always pay above the minimum when you have some extra money. Also, take advantage of installment plans when available, but ensure that you prioritize the costliest debt. You may also leverage debt consolidation loans or lines of credit, like home equity lines, to eliminate your credit card debt quickly.

FAQ 

Why should I pay off credit card debt?

Paying off the money you borrow is essential for a healthy financial future. It reduces interest payments, improves your credit score, and frees up money for savings and investments. 

How can I avoid getting into debt?

Create and follow a realistic budget that tracks income and expenses. Use credit cards for planned purchases only and pay every month the full balance. Build an emergency fund to avoid relying on loans during unexpected situations.

What amount of debt is too much?

Debt becomes problematic when your debt-to-income ratio exceeds 40%, meaning your monthly debt payments consume more than 40% of your monthly income. If you're using more than 30% of your available credit limit, this may also negatively impact your credit score.