A credit card allows you to borrow a pre-approved amount of money. It may help you pay for goods and services. When using a credit card, you must pay your minimum payment by the due date. If you don’t pay your balance in full, your credit card issuer usually charges an interest fee. Credit card issuers offer a variety of cards.

The key differences are:

• the interest rates
• the fees
• the rewards and benefits

Comparing credit card interest rates

A credit card’s interest rate may be an important factor if you regularly carry a balance. A balance is the amount of money you owe on your credit card. The higher the interest rate, the more interest you'll pay on an outstanding balance. A lower interest rate card may save you money over time.

Different interest rates may apply to different types of transactions. These transactions include purchases, cash advances or balance transfers.

The interest rate may not be an important factor in choosing a credit card if you:

• pay your balance in full every month
• don’t take out cash advances
• don’t make cash-like transactions

There are many credit cards with low interest rates available. Some low-rate cards charge an annual fee. Even if there is a fee, a low-rate card may be a better option.

Example: Compare low interest rate cards and standard cards

Suppose you regularly carry a balance on your credit card. You want to pay off your balance of $4,000 in one year. 

Your current credit card has:

• an interest rate of 21%
• no annual fee

You’re considering a low interest rate card with

• an interest rate of 9%
• a $50 annual fee

In this example, you'll pay $273 less in interest with the low interest rate card. This is even with the $50 annual fee. Keep in mind that this example assumes you don't use your credit card while you pay down your balance.

Credit card introductory offers with low interest rates

Some credit card issuers offer cards with low interest rates for a limited time. Generally, the low interest rate will apply for a limited time, usually 6 to 12 months. The rate will increase once the introductory period ends. Consider the following after the introductory period ends:

• if you can afford a higher interest rate
• if the card still suits your needs

In some cases, the introductory rate ends as soon as you go over your credit limit or make a late payment.

Federally regulated credit card issuers must give you the following key details about introductory rates:

• the date at which the low interest rate ends
• the types of transactions the introductory rate covers
• the other fees or conditions that apply
• the standard interest rate you’ll pay after the low interest rate period ends

Before you sign up for an introductory low-rate or interest-free credit card, read the application and credit agreement carefully.

Comparing credit card rewards and benefits

Credit cards may offer rewards and benefits. When you use your card to make purchases, you may earn cash back or discounts on products and services. You may have to pay a fee for this type of card.

Before you choose a credit card for its rewards program or benefits, consider the following:

• the impact of carrying a monthly balance
• the interests you’ll pay
• the frequency at which you expect to use the card’s benefits

These factors may reduce the value of the card’s rewards or benefits.

You should also keep in mind the additional fees that may apply at checkout. A merchant may choose to impose a surcharge fee (except in Quebec). You may end up paying up to 2.4% more for each purchase. The percentage may vary from one merchant to another depending on the card you used for the purchase.

Learn more about merchant surcharges.

Compare the rewards and benefits offered by different cards.

Think about:

• how likely you are to use each benefit
• how long it will take you to earn rewards
• if you already have access to the benefit some other way
• if there are any restrictions or limitations

Read the terms and conditions of the credit card application and agreement carefully. Ask questions about anything you don't understand.

Examples: Estimating the value of rewards and benefits

Before you get a credit card with rewards and benefits, make sure it’s worth it. You may estimate the potential value of the rewards you may earn in a year and then subtract the annual fee.

The following examples illustrate how to determine a card’s reward’s program benefit.

In the examples, the assumptions are that you:

• pay your balance in full each month
• don’t use your card for cash advances or cash-like transactions

Example 1: Grocery rewards

Suppose you have a credit card with the following conditions:

• a $25 annual fee
• 10 points for every dollar you spend at the grocery store
• $10 off your grocery bill for every 10,000 points you earn

In this example, you save $15 with the credit card’s reward program.

Example 2: Cash back rewards

Suppose you have a credit card with the following conditions:

• a $85 annual fee
• 1% cash back on purchases

Because the $85 annual fee is higher than the $48 reward benefit you receive, this credit card isn’t worth it.

Comparing credit card fees

When you use a credit card, you may have to pay fees for services. These fees include taking out a cash advance or using your card in foreign countries. Different credit cards have different fees.

Read the terms and conditions of the credit card application and agreement carefully. Ask questions about anything you don't understand.

Annual fees

Financial institutions may charge an annual fee for some of their credit cards. Usually, the charge will appear on your credit card statement once a year. Cards with an annual fee usually offer extra rewards and benefits or a lower interest rate.

You may have to pay an additional annual fee if you request a card for an additional cardholder. The fee for the second card is typically lower than it is for the first card.

Keep in mind that you may choose a credit card with no annual fee. Some no-fee credit cards offer similar rewards and benefits to cards that do have an annual fee.

Before you apply for a credit card with an annual fee, consider how you'll use the card. Think about whether the rewards and benefits are worth the annual fee. Also consider if there is a similar card available that doesn’t have an annual fee.

Other fees

You may also have to pay fees such as:

• foreign currency charges
• over-the-limit fees
• reprinting charges for statements or receipts from previous transactions
• dishonoured payment fees
• inactive account fees
• insurance fees, also known as premiums for credit card balance insurance
• merchant surcharges (except in Quebec). It’s additional fees added at checkout for using a credit card as a method of payment

Get electronic alerts from your financial institution

Your financial institution may send you an electronic alert when the credit available on your credit card falls below a certain amount.

This alert may help you manage your day-to-day finances and avoid fees.

Learn more about electronic alerts.

Specialized credit cards

Depending on your credit history and spending habits, a specialized credit card may suit your needs.

Student credit cards

Some credit cards are made for students. These cards often have lower credit limits than standard credit cards. They may have benefits tailored to students, such as discounts at certain retailers.

Low interest rate student credit cards are also available. Contact your credit card issuer to find out if you’re eligible for a student credit card.

U.S. dollar credit cards

A U.S. dollar credit card may work for you if you often purchase goods or services in U.S. dollars. With this type of credit card, you may avoid having to pay foreign currency conversion rates.

Retail credit cards

A retail credit card is a credit card that lets you earn rewards, such as discounts, at a specific retailer. Retailers often offer buy now, pay later plans with extended interest-free periods. They may also offer discounts or reward programs with in-store credit cards. Keep in mind that these offerings often apply only to purchases made at the store that issued the card.

If you shop at one store enough, you may benefit from its rewards programs. Be sure to consider the potential benefits against any interest or fees you may pay.

For example, if you don’t pay the balance in full before the interest-free period ends, you'll have to pay interest from the date of purchase. Since the interest rate for retail cards is usually high, even the items you bought at a discount may end up costing you more than the regular price.

Find out more about buy now, pay later plans.

Secured credit cards

A secured credit card may be an option if you don’t have a credit history or if you have bad credit.

You must provide a security deposit to get a secured credit card. You give the security deposit to the financial institution that issues the credit card.

Financial institutions normally set your credit limit at an amount that is equal to or higher than your deposit. The security deposit may range from a few hundred to a few thousand dollars.

If you don't make your payments, the financial institution may use your deposit to pay the money you owe.

You may want to consider a secured credit card if you:

• are a newcomer to Canada and have no credit history
• have filed for bankruptcy in the past
• want to rebuild your credit score after past credit problems

Learn how to improve your credit score.

Be careful when applying for a secured card from an unknown financial institution. Be particularly careful of secured card offers from issuers outside Canada. If you have problems with the company’s services, it may be more difficult to resolve them.

Secured cards without a recognized brand name such as VISA, Mastercard or American Express may have limited uses. Only a small number of stores accept them.

Getting a secured credit card

To get a secured credit card, you may have to pay a one-time application or set-up fee. This fee isn't part of your security deposit. You may not get it back if the financial institution declines your application. Your card may have an annual fee.

Check with your financial institution to make sure they insured your deposit. Your financial institution usually holds your security deposit. It may also arrange with another financial institution to hold the deposit.

Cancelling your secured credit card

To cancel a secured credit card, you need to pay off the entire balance. You'll get your security deposit back when you close your account.

Applying for a credit card

To apply for a credit card, you must be of legal age in your province. Before you complete a credit card application, make sure you understand all the terms and conditions that apply to the card.

If you apply for a credit card from a federally regulated financial institution such as a bank, the application must include an information box. The information box must present key features of the credit card. Interest rates, fees and other charges must be presented in a clear and easy-to-understand way.

Learn more about your rights when getting a credit card.

Optional credit card balance insurance

When you apply for a credit card, financial institutions may also offer you credit card balance insurance. It is optional insurance that’s a separate product from your credit card. You don’t need to buy credit card balance insurance to be approved for a credit card.

Balance insurance may help you make credit card payments if you:

• lose your job
• become injured or disabled
• become critically ill

Balance insurance has important limits on the coverage it provides. Read your certificate of insurance carefully and ask questions if you don’t understand what it covers.

Learn more about credit card balance insurance.

Check your credit report before applying for a credit card

Check your credit report with Canada’s 2 main credit bureaus, TransUnion and Equifax.

Learn how to get your credit report.

If your credit report contains an error, take action to correct it immediately. Errors in your credit report may be the reason you couldn’t get an unsecured credit card.

Learn how to check for errors on your credit report.

How credit cards work

From: Financial Consumer Agency of Canada

On this page

• Types of credit card transactions and associated fees
• Credit limit
• How interest is applied to your credit card
• Other credit card fees
• Using your credit card in a foreign country

A credit card allows you to pay for goods and services in stores, online and by telephone. Your credit limit is the maximum total amount you can spend. As you pay down your balance, you have access to more credit. This is called revolving credit.

Types of credit card transactions and associated fees

You may use your credit card for different types of transactions.

Credit card purchases

You may use your credit card to pay for goods and services:

• at a point of sale, like a cash register or checkout
• over the phone
• online
• by mail

It’s a good idea to keep receipts for all your credit card purchases. Check your receipts against your credit card statement to make sure there are no mistakes. If you find a mistake, contact the merchant to correct the transaction. A merchant is the business that sold you goods or services. If the merchant doesn’t correct the transaction, contact your financial institution for assistance.

Find out how to resolve an unauthorized transaction.

You might be able to turn your qualifying purchases into buy now, pay later plans. Credit card providers typically call this option equal instalment payments or instalment plan. Make sure you understand the pros and cons of these types of plans.

Find out more about buy now pay later plans.

Merchant surcharges and discounts

Merchants may add a surcharge to your transaction for using your credit card (except in Quebec). Your purchase may cost you up to 2.4% more.

They must inform you of the surcharge before processing your payment. This allows you to cancel your purchase before authorizing payment or pay with an alternative form of payment.

Merchants must also clearly disclose the surcharge:

• at the point of sale, both in store and online
• at the entrance of a physical store
• on every receipt

To avoid surcharges you may:

• choose to use another payment method such as cash or debit
• go to another merchant who doesn’t charge a surcharge

Cash advances

You may use a credit card to get a cash advance by:

• taking out cash at an automatic teller machine (ATM)
• getting cash from a financial institution

There is no interest-free grace period with cash advances. You'll pay interest from the date you get a cash advance until you pay it back in full. The interest rate for cash advances is usually higher than for regular purchases. For example, the interest rate for regular purchases may be 19%, but it may be 22% for cash advances.

A cash advance may be a very expensive way to borrow money. Before you take out a cash advance, consider a cheaper way to borrow. Consider a personal loan or line of credit. When you use cash advances, try to pay off as much of your balance as early as possible.

Cash advance fees

You may also have to pay a fee each time you get a cash advance.

The fee may be:

• a fixed amount per cash advance
• a percentage of the amount of the cash advance
• a fixed amount plus a percentage of the cash advance

Some financial institutions set a minimum and a maximum amount for those fees.

Cash-like transactions

Financial institutions often treat the following types of transactions like cash advances:

• wire transfers from one financial institution to another electronically
• money orders (a prepaid paper payment for a specific amount)
• travellers’ cheques (a prepaid cheque to pay for goods and services while travelling)
• gaming transactions (placing bets, buying casino gaming chips and buying lottery tickets)

Like a cash advance, you’ll pay interest from the date you make the cash-like transaction. The interest for a cash-like transaction is usually higher than for regular purchases. You may also have to pay a fee each time you make a cash-like transaction.

Check your credit agreement or contact your financial institution to find out if they consider your purchase as a cash-like transaction.

Credit card cheques

You may use credit card cheques, also called convenience cheques or promotional cheques, to make purchases the same way you would with personal cheques. You may also use them to pay bills or other debts such as outstanding balances on other credit cards.

You’ll pay interest from the date you use the cheque. The interest rate charged when you use a credit card cheque is usually higher than for regular purchases.

Financial institutions link credit card cheques to your credit card account. If you use them to pay for goods or services, the amount will appear on your credit card statement.

If you don’t want to use credit card cheques, cut them up before throwing them out. It will help avoid fraud. Contact your credit card issuer and ask them to stop sending credit card cheques.

Learn more about your rights when using credit card cheques.

Balance transfers

A balance transfer is when you move your balance from an old credit card to a new one. That new card generally has a lower rate which helps you save money in interest payment.

You’ll usually have to pay a fee to transfer a balance from one card to another. A balance transfer fee is usually a percentage of the amount that you transfer.

Suppose you transfer a $1,000 balance to a different credit card with a balance transfer fee of 3%. The balance transfer fee would be $30. Keep in mind that you’ll still need to pay interest on the balance transfer.

Before you transfer a balance, be sure to read the terms of your credit card agreement carefully. Usually, the promotion will only apply for a specific period. Ask your financial institution about anything you don't understand.

Credit limit

Your credit limit is the maximum amount you may spend on your credit card. Credit card issuers set your limit when you first get your credit card. You may ask them to reduce or increase it.

Your credit card issuer must get your permission in writing or verbally before increasing your credit limit. When you do so, you give your express consent. If you give your express consent, your credit card issuer must confirm the change in writing. They must do so no later than your next credit card statement.

Learn more about giving express consent for financial products and services.

Over-the-limit fees

It’s your responsibility to monitor your balance and stay within your limit. If you go over your limit, you may have to pay an over-the-limit fee.

Federally regulated financial institutions can’t charge over-the-limit fees in certain situations. For example, if a merchant puts a temporary hold on your credit card that goes over the credit limit.

Suppose you have $90 left until you reach your credit limit. You buy gas with your credit card. The gas retailer places a $100 temporary hold on your card until you finish filling up. It costs you $20 to fill up. In this case, the financial institution can’t charge an over-the-limit fee.

If you’re often close to your credit card limit, ask your financial institution to increase your credit card limit. You may also ask your financial institution to stop any transactions that will go over the limit. Certain low-value transactions may still go through. Not all financial institutions offer this service.

Read the terms of your credit card agreement to see if transactions over your limit will go through. See if there are any fees if they do. Ask your financial institution about anything you don’t understand.

Getting electronic alerts from your financial institution

Your financial institution may send you an electronic alert when the credit available on your credit card falls below a certain amount.

These alerts may help you manage your day-to-day finances and avoid fees.

Learn more about these electronic alerts.

How interest is applied to your credit card

You’ll pay interest if you don’t pay your credit card balance in full by the due date. You’ll continue to pay interest until you pay your balance back in full.

Interest rates vary depending on your financial institution and the type of transaction. For example, you may pay 19% interest on regular purchases and 22% on cash advances or cash-like transactions. Rates for specialized and retail credit cards may be higher.

Federally regulated credit card issuers may choose how they apply your payments to your balance.

Learn how payments are applied to your balance.

Your credit card statement and your credit card agreement must clearly indicate the interest rates you must pay.

Learn more about your rights when getting a credit card.

Interest-free grace periods

Credit card issuers give a grace period to pay for your previous month’s purchases without interest. The grace period begins on the last day of your billing period. You may find your billing period on your credit card statement. The grace period doesn’t apply to cash advances, cash-like transactions and balance transfers.

Federally regulated financial institutions must provide a minimum 21-day grace period.

For example, suppose you buy a smartphone using your credit card on January 15. On February 1, you get your January credit card statement which includes the smartphone purchase. A 21-day interest-free grace period will apply to purchases made in January. You have until February 21 to pay off the smartphone and your other purchases to avoid interest charges.

Increases in interest rates

If you don’t make your required minimum monthly payments by the due date, your interest rate may increase. Interest rate increases may be different depending on your type of credit card and your credit card issuer. The increase may be temporary or permanent.

If you miss a payment, you may lose your promotional interest rate. It may also increase your interest rate. Check with your credit card issuer how much your interest rate will increase. You can also find this information in your credit agreement or the information box included in the credit card application.

Federally regulated financial institutions must notify you before an interest rate increase takes effect.

Other credit card fees

Fees and penalties vary depending on the type of credit card transaction and the financial institution. Read your credit card agreement carefully. Ask your financial institution about anything you don’t understand.

Reprinting fees

Your financial institution may charge you when you ask for copies of certain documents such as:

• reprinted statements
• receipts from transactions on previous statements

To find out if you must pay reprinting fees, check your credit card agreement or contact your financial institution.

You may be able to avoid these fees by viewing your credit card statements online. Financial institutions usually allow access to online statements for the previous 12 months. To use this service, you need to register for it on your financial institution’s website.

Dishonoured payment fees

Your financial institution may charge you a fee to handle a payment that is dishonoured, or that bounces back.

This fee applies if you:

• make your payment by credit card cheque and the cheque is returned because of non-sufficient funds (NSF)
• make your payment by pre-authorized debit that’s rejected because of NSF
• use a credit card cheque for a cash advance, and it is over your limit

Inactive account fees

Some financial institutions will charge an inactive account fee if you don’t use your credit card for a long time. The financial institution may even close your account if your card is inactive for a year. If you no longer need or use your credit card, contact your financial institution to cancel it.

Learn how to cancel your credit card

To maintain or improve your credit score, consider keeping one account open with a low credit limit. Only keep what you need and can manage responsibly.

Using your credit card in a foreign country

When you use your credit card outside of Canada, your financial institution will apply:

• an exchange rate for the purchase
• a foreign currency conversion charge

Foreign currency conversion charges

Financial institutions calculate foreign currency charges in different ways. They convert some transactions directly into Canadian dollars. They may convert some transaction to U.S. dollars and then to Canadian dollars. They apply the foreign currency conversion charge after converting the purchase to Canadian dollars.

Example: Foreign currency conversion charge calculation

Suppose you made a €1,000 purchase with your credit card. The exchange rate is 1.45 to convert euros directly to Canadian dollars. Your credit card agreement shows a conversion rate of 2.5%.

The total amount of your purchase is $1,486.25 in Canadian dollars. Read the terms of your credit card agreement for the total foreign currency conversion charge. Ask your financial institution about anything you don’t understand.

Foreign cash advance fees

The fee for a cash advance outside of Canada is typically higher than it is in Canada. A foreign currency conversion charge may also apply to a foreign cash advance. You’ll need to pay interest charges from the date you take out the money until you pay back the full amount.

Returning items you purchased outside of Canada

If you return items you bought with a foreign currency, the refund that appears on your statement may be for a different amount than your purchase. This is because the exchange rate varies from day to day. It may be different on the date the refund goes through.

Using your credit card responsibly

From: Financial Consumer Agency of Canada

On this page

• ​Tips when using your credit card
• Warning signs that you're overspending
• Consider other credit options

​Tips when using your credit card

When you use your credit card, you’re borrowing money that you have to pay back. A credit card doesn’t increase the amount of money you have. Your credit card spending should fit within your regular household budget.

If you don't use your credit card wisely, you may end up:

• building up debt
• paying interest
• hurting your credit score

Aim to pay off your balance every month

The money you owe on your credit card is your balance. Try to pay it off by the due date each month. If you don't pay your balance by the due date, you'll pay interest from the date you made the purchase. The interest you pay will increase the cost of everything you buy with your credit card.

Paying your balance each month shows lenders that you’re a responsible borrower. Regularly making late payments or missing payments will hurt your credit score.

Pay at least the minimum amount

If you can’t pay your balance, always aim to pay at least the minimum amount you owe.

If you don't pay at least the minimum amount, you risk:

• your interest rate increasing
• negatively affecting your credit score
• losing the benefit of any promotional rate offer you have
• your financial institution cancelling your credit card
• your card provider cancelling your credit card balance insurance

Regularly check your statement for errors

Carefully review your monthly credit card statement to make sure that there are no errors.

When you check your credit card statement online, purchases will usually appear after a few days. Keep receipts of all your credit card purchases so you can check the amounts against your statement.

If you find an error, report it right away. Contact the financial institution that issued the credit card.

Get electronic alerts from your financial institution

Your financial institution may send you an electronic alert when the credit available on your credit card falls below a certain amount.

These alerts may help you manage your day-to-day finances and avoid fees.

Learn more about these electronic alerts.

Keep your personal information confidential

Protect:

• your card
• your personal identification number (PIN)
• your card security code, also known as the CVV number located on the back of your credit card
• your credit card password for online transactions

If you share your information, you may be held financially responsible for unauthorized transactions.

Warning signs that you're overspending

If one or more of the situations below apply to you, you may be living beyond your means:

• your credit card balance keeps growing
• you’re reaching your credit card limit
• you carry a credit card balance from month to month
• you don’t make a payment or only make the minimum payment on your credit card
• you take out cash advances with your credit card

If you often find yourself in one of these situations, do the following:

• stop using your credit card, if possible
• avoid applying for a new credit card because you've reached your credit limit on other cards
• look at your budget for ways to reduce spending
• if you have to use credit, consider other less expensive credit options

Learn how to make a budget.

Consider getting help if you’re having trouble making payments.

Consider other credit options

Consider other ways to borrow money if you’re having trouble paying off your credit card. Certain products may cost less in interests. These options may include:

• a low interest rate credit card, such as a secured card
• a line of credit or a personal loan

Contact your financial institution to discuss the options that are available to you.

Making your payments on time

You can choose to pay your balance in different ways such as:

• online
• by telephone
• at an ATM
• in person at a branch
• by pre-authorized debit
• by mail with a cheque

The payment method you choose can affect how quickly the issuer processes it and the date they consider it paid. The time to process your payment will also vary depending on your financial institution. Make sure you know when your issuer will process your payment to avoid making a late payment.

Issuers process credit card payments during business days from Monday to Friday. If a payment is due on a weekend or holiday, you can make your payment the following business day. This will count as paying on time.

Contact your credit card issuer to find out how long it takes to process different payment methods.

Making at least the minimum payment

Make at least the minimum payment if you can’t pay off your balance. The minimum payment is the minimum amount you must pay each month on your credit card balance.

Your minimum payment will be:

• a flat dollar amount, usually $10, plus any interest and fees, or
• the higher of a dollar amount, typically $10, or a percentage of your outstanding balance, typically 3%

Your credit agreement will tell you which method your credit card issuer uses to calculate your minimum payment.

Paying only the minimum amount means:

• it takes you longer to pay off your balance
• you pay more interest

Increasing your monthly payment will shorten the time it will take you to pay off your balance. Even a small amount will shorten the time by a lot. 

Since August 1, 2024, the credit card minimum payment for Quebec residents is 4.5%. The rate will increase by 0.5% until it reaches 5% in 2025.

Use the Credit Card Payment Calculator to compare your payment options.

Your credit card issuer may be a federally regulated financial institution. In that case, your credit card statements must include the time required to pay off your balance by only paying the minimum amount.

Learn more about the information your financial institution must give you about your credit card.​

Payment holidays

Your credit card issuer may offer you a payment holiday. This means they'll let you skip a payment. You'll still pay interest.

Your credit card issuer may be a federally regulated financial institution. In this case, they must clearly tell you if you'll pay interest when you skip a payment. This information must come with the payment holiday offer.

For information on payment holidays, check the terms of your credit card agreement. You can also contact your credit card issuer. Ask questions about anything you don't understand.

How credit card issuers apply payments to your balance

If you don’t pay your credit card balance by the due date, you’ll pay interest.

Different interest rates may apply to different types of credit card transactions. For example, cash advances often have a higher interest rate than purchases. This means different interest rates will apply to your balance depending on how you use your credit card.

Typically, your minimum payment will apply to the portion of your balance with the lowest interest rate. Any amount you pay over the minimum payment applies in one of the following 2 ways:

• to the portion of the balance with the highest interest rate
• proportionally to the entire balance

Your credit card issuer may be a federally regulated financial institution. In this case, they can decide how they'll apply your minimum payment to your balance.

Check your credit card agreement or ask your credit card issuer how they apply payments to your balance.

Missing or making late payments

If you don’t pay at least the minimum payment or you make a late payment, you risk:

• your interest rate increasing
• negatively affecting your credit score
• losing the benefit of any promotional rate offer you have
• your financial institution cancelling your credit card

Filing a complaint about your credit card issuer

Federally regulated financial institutions must have a process to resolve disputes between consumers and their financial institutions.

Make a list of your debts

Start by identifying what you owe. Make a list of all your debts.

For each one, note:

• the total amount you owe
• the minimum monthly payment
• the interest rate

Your list may include:

• mortgages
• car loans
• credit cards
• lines of credit
• personal loans
• student loans
• payday loans
• taxes you owe
• buy now, pay later plans
• unpaid utility bills (cell phone, electricity television, etc.)
• loans from friends and family
• spousal support and/or child support you owe
• any other unpaid bill (property taxes, store financing, etc.)

Use the Financial Goal Calculator to manage your debts and set savings goals.

Review your budget

A budget is a plan that helps you manage your money.

It can help you:

• figure out how much money you get, spend and save
• balance your income with your expenses
• guide your spending to help you reach your financial goals

Reviewing your budget can help you repay your debt faster. When reviewing it, put needs before wants and try reducing your expenses. You’ll be able to cut some expenses that are not necessary. This way, you’ll have more money available to repay your debts.

Use the Budget Planner to manage your money and improve your finances.

File your taxes

File your taxes each year to get the benefits and credits you may be eligible for. You may get money back to help repay your debt. Even if you have little to no income, you should still file your tax return.

Learn more about tax credits and benefits for individuals.

Use the Benefits Finder to find benefits that you may be eligible to receive.

You can also get help with your tax return if you have a modest income and a simple tax situation. Volunteers at a free tax clinic may be able to complete your tax return for you.

Find out if you’re eligible for a free tax clinic based on your income and tax situation.

Decide on a strategy

Once you’ve created a list of all your current debts, start your plan to pay them off. The types of debt and the amount of debt you owe will influence your strategy for paying them off.

Choose a timeframe

Set a payment timeframe that is reasonable and affordable.

If your timeframe is too long, you may lose focus if there’s no progress in paying down your debts. You'll also end up paying more money in interest over time.

If your timeframe is too short, you may not be able to keep up with your payments. You may start to feel like it's unrealistic to continue.

Keep in mind, if interest rates rise, your monthly payments may increase.

Learn how to manage your money when interest rates rise.

Decide which debts to pay off first

Depending on the type of debts you owe, it may be best to pay off certain debts first.

Debts with high interest rates

By paying off the debts with the highest interest first, you'll pay less interest. This will help you be debt-free sooner.

List your debts in order, from the highest interest rate to the lowest. Make the minimum payments on all your debts. Then use any extra money to pay down the debt with the highest interest rate.

For example, payday loans often carry the highest interest rates of any debts you may owe, followed by credit cards.

Learn how payday loans work and what questions to ask a payday lender.

Debts with the lowest balance

You may find it easier to start with your debt with the lowest balance. You'll feel the accomplishment of paying off a debt sooner. This can keep you motivated to maintain your goal to become debt-free. However, this option may cost you more over time. For example, if you have one or multiple debts with high interest rates.

Make a plan to pay back your family or friends

If you have a personal loan with family or friends, talk to them about the money you owe. Commit to a payment schedule that works for you and the person who lent you money.

Consider writing post-dated cheques or setting up automatic money transfers to stick to the payment plan. This will show that you're committed to repaying them.

Work directly with your creditors and your financial institution

Contact your creditors to discuss your financial situation with them. Your creditors are the companies you owe money to.

They may offer you:

• a lower interest rate on your debt
• to extend your payments over a longer period to reduce your minimum monthly payment
• to consolidate your debts into one loan

Close accounts on debts you’ve paid off

Once a debt is paid, consider closing that account. Only keep what you need and can manage responsibly. However, you should keep an older account open. Your credit score is based in part on how long you’ve had credit, also known as your credit history. Keeping an older credit account open helps maintain a long-term credit history.

Learn more about how your credit score is calculated.

Consider a secured credit card

You may also want to consider using a secured credit card instead of a regular credit card. It requires you to leave a deposit with the credit card issuer as a guarantee and you can only spend to that limit.

Learn how to use and apply for a secured credit card.

Consolidate your debts

You may want to consider applying for a loan to pay off multiple debts with high interest rates. This is called consolidating your debts.

Consolidating your debts means you’ll only have to make one monthly payment instead of paying each debt individually.

A consolidation loan may help you get out of debt if:

• it has a lower interest rate than the debts you are consolidating
• it has a lower monthly payment than all your other debts put together. This way you can put the extra money toward paying down your debt faster
• you avoid taking on more debt while you are paying the loan

If you're considering a consolidation loan, ask your financial institution which debts you'll be able to group together.

Eligibility for a consolidation loan

Your financial institution may be able to provide you with a consolidation loan depending on your situation. To be eligible, you must have an acceptable credit score and enough income to make the monthly payments.

Shop around for a consolidation loan

Some companies offer consolidation loans with interest rates that are higher than the debts you are trying to consolidate. Shop around to find the lowest rate and weigh your options. Although it’s not the biggest factor, applying for loans with different lenders within a short period of time may lower your credit score.

Financial institutions may offer you different interest rates depending on the type of product you choose. Shopping around might help you find the best loan for your budget.

Learn more about getting a loan.

Avoid taking on more debt

If you spend more than your income, it will be difficult to become debt-free.

If you're considering borrowing more money, understand how it would impact:

• your existing debt payments
• your budget
• your ability to save for other goals
• your credit report and score

You're at risk of no longer being able to manage your debt if:

• you're already having trouble making your debt payments
• you're close to your credit limit
• you would have trouble making higher payments if interest rates increased

Tips to avoid taking on more debt

Follow these tips to lower your chances of taking on more debt.

Save for your financial goals

You can avoid taking on more debt by saving for your financial goals. For example, your child's education, a new car or a down payment on a house.

Saving a little every day can go a long way. Good examples of ways you can save money include:

• taking public transit instead of driving your car and paying for parking
• bringing your lunch to work instead of eating out
• making your coffee at home instead of going to the coffee shop

Learn how to set savings and investment goals.

Use your credit card responsibly

Your credit card spending should fit within your budget. If you don’t use your credit card wisely, you may end up taking on more debt.

To avoid getting into more debt, you can use cash or debit instead of your credit card. That way you'll avoid spending money you don’t have. You should also stop using your credit card until you’ve reached your debt repayment goal.

Learn more on how to use your credit card responsibly.

Avoid "buy now, pay later" plans

Many companies now offer buy now, pay later plans for the purchase of products and services. With this type of plan, you are financing your purchase with credit. You purchase something and spread the payment over a period of time. Buy now, pay later plans could encourage you to spend beyond your means.

Be sure to pay your balance in full by the due date. If you don't, the fees and high interest rates that you’ll pay will be added to your debt load.

These types of plans can be an expensive way to borrow money. You need to make your payments on time to avoid fees. These fees may lead to over-borrowing and put your credit at risk.    

Learn more about buy now, pay later plans.

Reduce your banking fees

Use ATMs from your own financial institution.

Review your banking package to know how many transactions are included.

Use the Account Comparison Tool to compare accounts and fees.

Get electronic alerts from your financial institution

Look for ways to increase your income

Consider selling some of your assets or taking on more work to make extra money to put towards your debt.

Rebuild your credit

Getting into debt may harm your credit score. A poor credit score can affect more than your ability to borrow. For example, many employers require a good credit score in order to hire you. Landlords may also run a credit check before accepting you as a tenant.

You can improve your credit score by:

• making sure you make payments on time and in full
• not using all the credit that is available to you
• not applying for new credit if you don’t need it

Learn how to improve your credit score.

Know where to get help

If you’re trying to pay down debt and need help, don’t wait too long. Be proactive and seek help before experiencing challenges.

You can contact:

• an accredited not-for-profit credit counsellor
• a financial advisor
• a Licensed Insolvency Trustee

With their help, you'll be able to:

• evaluate your current debt situation
• determine your current and future needs
• make a budget
• find ways to pay off the debt

Before you sign up for services to get help to pay off your debt, explore your options. Compare the different services offered.

Getting help from a credit counsellor.

Find a Licensed Insolvency Trustee near you.

Make a list of your debts

Start by identifying what you owe. Make a list of all your debts.

For each one, note:

• the total amount you owe
• the minimum monthly payment
• the interest rate

Your list may include:

• mortgages
• car loans
• credit cards
• lines of credit
• personal loans
• student loans
• payday loans
• taxes you owe
• buy now, pay later plans
• unpaid utility bills (cell phone, electricity television, etc.)
• loans from friends and family
• spousal support and/or child support you owe
• any other unpaid bill (property taxes, store financing, etc.)

Use the Financial Goal Calculator to manage your debts and set savings goals.

Review your budget

A budget is a plan that helps you manage your money.

It can help you:

• figure out how much money you get, spend and save
• balance your income with your expenses
• guide your spending to help you reach your financial goals

Reviewing your budget can help you repay your debt faster. When reviewing it, put needs before wants and try reducing your expenses. You’ll be able to cut some expenses that are not necessary. This way, you’ll have more money available to repay your debts.

Use the Budget Planner to manage your money and improve your finances.

File your taxes

File your taxes each year to get the benefits and credits you may be eligible for. You may get money back to help repay your debt. Even if you have little to no income, you should still file your tax return.

Learn more about tax credits and benefits for individuals.

Use the Benefits Finder to find benefits that you may be eligible to receive.

You can also get help with your tax return if you have a modest income and a simple tax situation. Volunteers at a free tax clinic may be able to complete your tax return for you.

Find out if you’re eligible for a free tax clinic based on your income and tax situation.

Decide on a strategy

Once you’ve created a list of all your current debts, start your plan to pay them off. The types of debt and the amount of debt you owe will influence your strategy for paying them off.

Choose a timeframe

Set a payment timeframe that is reasonable and affordable.

If your timeframe is too long, you may lose focus if there’s no progress in paying down your debts. You'll also end up paying more money in interest over time.

If your timeframe is too short, you may not be able to keep up with your payments. You may start to feel like it's unrealistic to continue.

Keep in mind, if interest rates rise, your monthly payments may increase.

Learn how to manage your money when interest rates rise.

Decide which debts to pay off first

Depending on the type of debts you owe, it may be best to pay off certain debts first.

Debts with high interest rates

By paying off the debts with the highest interest first, you'll pay less interest. This will help you be debt-free sooner.

List your debts in order, from the highest interest rate to the lowest. Make the minimum payments on all your debts. Then use any extra money to pay down the debt with the highest interest rate.

For example, payday loans often carry the highest interest rates of any debts you may owe, followed by credit cards.

Learn how payday loans work and what questions to ask a payday lender.

Debts with the lowest balance

You may find it easier to start with your debt with the lowest balance. You'll feel the accomplishment of paying off a debt sooner. This can keep you motivated to maintain your goal to become debt-free. However, this option may cost you more over time. For example, if you have one or multiple debts with high interest rates.

Make a plan to pay back your family or friends

If you have a personal loan with family or friends, talk to them about the money you owe. Commit to a payment schedule that works for you and the person who lent you money.

Consider writing post-dated cheques or setting up automatic money transfers to stick to the payment plan. This will show that you're committed to repaying them.

Work directly with your creditors and your financial institution

Contact your creditors to discuss your financial situation with them. Your creditors are the companies you owe money to.

They may offer you:

• a lower interest rate on your debt
• to extend your payments over a longer period to reduce your minimum monthly payment
• to consolidate your debts into one loan

Close accounts on debts you’ve paid off

Once a debt is paid, consider closing that account. Only keep what you need and can manage responsibly. However, you should keep an older account open. Your credit score is based in part on how long you’ve had credit, also known as your credit history. Keeping an older credit account open helps maintain a long-term credit history.

Learn more about how your credit score is calculated.

Consider a secured credit card

You may also want to consider using a secured credit card instead of a regular credit card. It requires you to leave a deposit with the credit card issuer as a guarantee and you can only spend to that limit.

Learn how to use and apply for a secured credit card.

Consolidate your debts

You may want to consider applying for a loan to pay off multiple debts with high interest rates. This is called consolidating your debts.

Consolidating your debts means you’ll only have to make one monthly payment instead of paying each debt individually.

A consolidation loan may help you get out of debt if:

• it has a lower interest rate than the debts you are consolidating
• it has a lower monthly payment than all your other debts put together. This way you can put the extra money toward paying down your debt faster
• you avoid taking on more debt while you are paying the loan

If you're considering a consolidation loan, ask your financial institution which debts you'll be able to group together.

Eligibility for a consolidation loan

Your financial institution may be able to provide you with a consolidation loan depending on your situation. To be eligible, you must have an acceptable credit score and enough income to make the monthly payments.

Shop around for a consolidation loan

Some companies offer consolidation loans with interest rates that are higher than the debts you are trying to consolidate. Shop around to find the lowest rate and weigh your options. Although it’s not the biggest factor, applying for loans with different lenders within a short period of time may lower your credit score.

Financial institutions may offer you different interest rates depending on the type of product you choose. Shopping around might help you find the best loan for your budget.

Learn more about getting a loan.

Avoid taking on more debt

If you spend more than your income, it will be difficult to become debt-free.

If you're considering borrowing more money, understand how it would impact:

• your existing debt payments
• your budget
• your ability to save for other goals
• your credit report and score

You're at risk of no longer being able to manage your debt if:

• you're already having trouble making your debt payments
• you're close to your credit limit
• you would have trouble making higher payments if interest rates increased

Tips to avoid taking on more debt

Follow these tips to lower your chances of taking on more debt.

Save for your financial goals

You can avoid taking on more debt by saving for your financial goals. For example, your child's education, a new car or a down payment on a house.

Saving a little every day can go a long way. Good examples of ways you can save money include:

• taking public transit instead of driving your car and paying for parking
• bringing your lunch to work instead of eating out
• making your coffee at home instead of going to the coffee shop

Learn how to set savings and investment goals.

Use your credit card responsibly

Your credit card spending should fit within your budget. If you don’t use your credit card wisely, you may end up taking on more debt.

To avoid getting into more debt, you can use cash or debit instead of your credit card. That way you'll avoid spending money you don’t have. You should also stop using your credit card until you’ve reached your debt repayment goal.

Learn more on how to use your credit card responsibly.

Avoid "buy now, pay later" plans

Many companies now offer buy now, pay later plans for the purchase of products and services. With this type of plan, you are financing your purchase with credit. You purchase something and spread the payment over a period of time. Buy now, pay later plans could encourage you to spend beyond your means.

Be sure to pay your balance in full by the due date. If you don't, the fees and high interest rates that you’ll pay will be added to your debt load.

These types of plans can be an expensive way to borrow money. You need to make your payments on time to avoid fees. These fees may lead to over-borrowing and put your credit at risk.    

Learn more about buy now, pay later plans.

Reduce your banking fees

Use ATMs from your own financial institution.

Review your banking package to know how many transactions are included.

Use the Account Comparison Tool to compare accounts and fees.

Get electronic alerts from your financial institution

Look for ways to increase your income

Consider selling some of your assets or taking on more work to make extra money to put towards your debt.

Rebuild your credit

Getting into debt may harm your credit score. A poor credit score can affect more than your ability to borrow. For example, many employers require a good credit score in order to hire you. Landlords may also run a credit check before accepting you as a tenant.

You can improve your credit score by:

• making sure you make payments on time and in full
• not using all the credit that is available to you
• not applying for new credit if you don’t need it

Learn how to improve your credit score.

Know where to get help

If you’re trying to pay down debt and need help, don’t wait too long. Be proactive and seek help before experiencing challenges.

You can contact:

• an accredited not-for-profit credit counsellor
• a financial advisor
• a Licensed Insolvency Trustee

With their help, you'll be able to:

• evaluate your current debt situation
• determine your current and future needs
• make a budget
• find ways to pay off the debt

Before you sign up for services to get help to pay off your debt, explore your options. Compare the different services offered.

Getting help from a credit counsellor.

Find a Licensed Insolvency Trustee near you.

A debt collection agency is a company that specializes in recovering unpaid debts. If you don't make your debt payments, a debt collector may contact you. Their objective is to collect money you owe on a credit card, line of credit, or loan.

Your creditor, that is, the company that you owe money to, may try to get their money back by:

• using their own debt collection department if it has one
• hiring a debt collection agency to get the money back on its behalf
• selling your debt to a debt collection agency

What happens when your debt is sent to a collection agency

You'll usually receive a written notice before a collection agency contacts you to collect the debt you owe.

The written notice should include:

• the name of the collection agency
• the name of the person or business you owe money to
• the amount you owe

Steps to take when you receive a notice

If you receive a notice that your creditor will send your debt to a collection agency, contact your creditor immediately.

You may be able to:

• pay a portion of the amount or the full amount owed to avoid having the debt transferred
• make alternative arrangements with your creditor to pay back your debt

What happens to your credit score

Once your creditor sends your debt to a collection agency, your credit score will go down.

A low credit score means:

• lenders may refuse to give you credit 
• lenders may charge you a higher interest rate for new credit
• insurance companies may charge you more for your policy
• landlords may refuse to rent to you
• employers may not hire you

Find out how long information stays on your credit report.

What to do when a debt collector calls

If a debt collector calls you, ask for and write down the following information:

• the agent's name
• the company they work for
• the name of the company they are collecting money for
• the debt collector’s telephone number

Ask for details on the debt, such as:

• the amount you owe
• who you owe it to
• when you started owing it

Tell the debt collector that you'll call them back as soon as you verify the information. Review your bills and bank statements to confirm if the debt is yours. This may also help you confirm if the amount you owe is correct.

You can ask the collection agency to contact you only in writing. Ask your legal advisor to send a written request to your creditor by registered mail. Make sure to include an address and phone number where they can reach you.

Paying your debt once it's with a collection agency

If the debt is yours and the amount is correct, paying the full amount you owe will resolve the issue.

When you pay back your debt:

• don’t send cash
• always get a receipt for any payment you make
• only deal with the debt collector who contacted you to make payments
• don’t contact the creditor that lent you money, as this might create confusion

If you're not able to pay the full amount:

• explain your situation to the debt collector
• offer an alternate method of repayment, such as monthly payments
• follow up with them in writing
• include a first payment to show your commitment to paying back the debt, if possible

What you should do if the debt isn't yours

If you think that the debt is someone else's, or that they made a mistake:

• tell the debt collector
• contact the creditor to find out what steps you should take to correct the error
• check your credit report to see if the debt appears on it

Learn how to check for errors on your credit report.

Your rights when dealing with a debt collector

You have rights with respect to how a debt collector collects your debt. This applies if it's a federally regulated financial institution or another party acting on its behalf.

Who a debt collector can contact

A debt collector can contact your friends, employer, relatives or neighbours only to get your telephone number or address.

This doesn't apply in the following cases:

• the person they contact has guaranteed (or co-signed) your loan
• they contact your employer to confirm your employment
• you've given your consent for the financial institution to contact the person

If you give verbal consent to your financial institution, they must provide you with confirmation, in writting, without delay.

When a debt collector can contact you

A debt collector can only contact you at the following times:

• Monday through Saturday between 7:00 a.m. and 9:00 p.m.
• Sundays between 1:00 p.m. and 5:00 p.m.

A debt collector can't contact you on holidays.

What a debt collector can't do

A debt collector can't do the following:

• suggest to your friends, employer, relatives or neighbours that they should pay your debt, unless they've co-signed your loan
• use threatening, intimidating or abusive language
• apply excessive or unreasonable pressure on you to pay the debt
• misrepresent the situation or give false or misleading information
• call you on your cell phone, unless you've provided that number as a way to contact you

A debt collection agency can't add any collection-related costs to the amount you owe other than:

• legal fees
• fees for non-sufficient funds on payments that you submitted

Learn more about your rights when dealing with debt collectors. 

Making a complaint about a collection agency

If you feel that the debt collector you're dealing with isn't respecting your rights, contact the appropriate regulator.

If you're dealing with:

• the debt collection department of a federally regulated financial institution
• a debt collection agency hired by a federally regulated financial institution

You can make a complaint with the Financial Consumer Agency of Canada.

Contact the Financial Consumer Agency of Canada.

If your creditor sold your debt to a collection agency, you can make a complaint with your consumer affairs office.

Find the consumer affairs office in your province or territory.