How to Step Off (And Stay Off) The Credit Card Treadmill

Date posted: Feb. 26, 2016
Credit Cards

Photo Credit: frankieleon

Most Canadians are aware of dangers of credit card debt. We’ve all seen the stories on the news of people who accumulate massive loads of debt from mindless spending on useless consumer goods. I'm sure you've seen those stories and thought "that will never happen to me."

But even if you have the best intentions of staying out of credit card debt, sometimes life happens, and if you don't prepare for these emergencies, the only place to turn is to your plastic. For many Canadians, the only choice to bridge the financial gap during employment, divorce, or illness is to carry a balance on a credit card.

While credit cards can be a short term solution to these problems, a high credit card balance can quickly get out of hand, and you may find yourself in a cycle of paying the balance and running it up again as unexpected expenses continue to pop up. This charge-pay-charge cycle is called the credit card debt treadmill, and the sooner you get off it, the better.

Carrying a balance on your credit card can be very expensive over the long term, especially if you are only making the minimum payment. For example, if you make minimum monthly payments on a $5,000 credit card balance with an interest rate of 19.99%, it will take you 20 years to pay off the balance, and you’ll pay $5,983.91 in just interest.

Simply put, you won’t progress far down the path to financial prosperity if you don’t get off the credit card debt treadmill. To help you step off the treadmill for good, I've prepared the following tips:

Build a Buffer

It may seem counter-intuitive that my first piece of advice for paying off credit card debt is to save money, but hear me out.

One of the most frequent reasons Canadians accumulate credit card debt in the first place is because emergencies happen and they don’t have enough savings to cover the cost. They turn to credit cards to bridge the gap, and before they can pay off the balance, more expenses pop up. Before they know it, they’re on the credit card debt treadmill.

The only way to stop this cycle is to put money into a savings account for a rainy day. If you have money in the bank to rely on, you won’t need to turn to your credit cards when unexpected expenses arise.

Saving just $2,000 lets you stop charging costs to your credit card and focus on paying it off instead. Once your debt is paid off, you can concentrate on building up a bigger savings buffer (known as an emergency fund) that can withstand more major emergencies like job loss or illness, so you’ll never have to rely on your credit cards again.

Lower Your Interest Rate

Your interest rate affects how quickly you can pay off your debt. If your interest rate is high, more of your debt payments are going towards interest and less towards paying down the principle balance.

For example, if you have $5,000 in credit card debt at an interest rate of 19.99%, you’re paying $999.50 per year in interest. But if you can lower your interest rate to 12.99%, you’ll pay only $649.50 per year.

You can reduce your interest rate on your credit card debt in a few ways: by calling your lender and asking for a lower rate, or by transferring the balance to a line of credit or balance transfer credit card.

If you choose to transfer your balance to a line of credit or balance transfer credit card, it is very, very important that you call your lender and lower the limits on your credit cards once they’ve been paid down. A zero balance credit card presents a temptation to run up the balance again and if you do that, you’ll end up even worse off than you were before. Don’t tempt yourself, lower your credit card balances.


If you choose to use a balance transfer credit card, read the fine print very carefully and make sure you have a plan in place to pay off the entire balance before the promotional period ends, otherwise you may be hit with a very large interest charge six to twelve months down the road.

Pay the Lowest Balance First

If you have debt spread across multiple credit cards, pick the credit card with the lowest balance to pay off first, and make minimum payments on the others.

Targeting one card at a time will help you focus and will show better results than trying to make payments on multiple cards. Picking the card with the lowest balance will give you a quick win when the card is paid off, and will give you the confidence you need to pay the rest of the credit cards off.

Make a Plan

Start tracking your spending and build a budget. You can use your budget to set aside money each month to put towards paying off your credit cards, and also to set aside money to put into your savings buffer.

Use a Credit Card Debt Calculator

Once you know how much you can afford to put towards paying off your credit cards each month, you can determine exactly how your payments will affect your balance by using a credit card debt calculator like this one offered by the Financial Consumer Agency of Canada. Credit card debt calculators will help you see the value of putting extra money towards your credit card debt, and how much sooner each payment will bring you to debt freedom.

Anyone can get stuck on the credit card debt treadmill. In fact, the average Canadian carries $21,028 in non-mortgage debt. But if you find yourself in this situation, you should know that you have the power to step off - and stay off - the credit card debt treadmill. Just follow the steps above, work hard, see it through, and you'll be on your way to financial prosperity.


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