Managing credit card debt is one of the biggest financial challenges many Canadians face. The rising cost of living, combined with low wage increases and easy access to credit, makes it easy to fall behind on payments. Debt relief options, such as balance transfer programs, debt consolidation, or credit counselling, can help regain control. However, there are many myths about credit card debt relief that can create confusion, fear, or lead to wrong decisions. Let’s separate myth from reality so Canadians can make informed financial decisions.
Myths vs reality of credit card debt relief
Myth #1: Making minimum payments is enough
Reality: Many people believe that making just the minimum payment each month keeps their finances on track. While it prevents late fees and keeps the account from going into default, it does not lead to true debt relief. In reality, paying only the minimum covers mostly interest, with only a small portion going toward the principal balance. Over time, this means paying far more in interest than the amount originally borrowed.
For example, a $5,000 balance with an interest rate of 19.9 percent could take over 20 years to pay off if only the minimum payment is made. Consistent minimum payments trap people in a long-term debt cycle. The best practice is to pay more than the minimum. Even an extra $10 – $20 can go a long way to reducing the balance and total interest cost.
Myth #2: Carrying a balance improves your credit score
Reality: A common misconception is that keeping a small balance on your credit card helps build credit. In truth, carrying a balance only increases the amount of interest you pay. Using a credit card is good for your financial health, and paying it off in full every month is the ideal situation. It can become a debt cycle when you don’t pay it off in full and start carrying a balance. The main factors that affect your credit score are your payment history and credit utilization ratio, not whether you carry a balance. Payment history measures how consistently you pay on time, while utilization refers to how much of your credit limit you are using.
Credit bureaus like Equifax and TransUnion, which oversee credit reporting in Canada, recommend keeping credit use below 30 percent of your limit. This shows that you handle credit responsibly without relying on it too heavily. Paying your balance in full each month is actually a sign of strong financial discipline and will not hurt your credit score.
Myth #3: You could go to jail for not paying off credit card debt
Reality: Some people worry that if they cannot pay off their credit cards, they could face jail time. In Canada, this is false. Failing to pay a credit card bill is a civil matter, not a criminal one. While a creditor can take legal steps to collect the money (like filing a civil lawsuit or getting a court order), these actions do not involve jail.
Debtors’ prisons were abolished in Canada in the 19th century. Today, the legal system focuses on repayment through court orders or garnishments, not punishment through incarceration. However, ignoring your debt completely can certainly make the situation worse by adding legal costs and damaging your credit score. If you are struggling, it’s better to contact a non-profit credit counselling agency or discuss repayment options before the account is sent to collections.
Myth #4: Debt will go away after a certain number of years
Reality: Another misunderstanding is that credit card debt simply disappears after several years. While negative information, such as unpaid debts, can drop off your credit report after six or seven years (depending on the province), that does not erase the debt itself. Legally, you still owe the money.
Each province in Canada has its own limitation period that defines how long a creditor has to sue for repayment. For example, in Ontario and British Columbia, the typical limitation period is two years after the last payment, but creditors can still contact you or sell the debt to a collection agency. Some judgments can remain enforceable for about six years in other provinces, and can even be renewed. The best approach is to address debts proactively through negotiation, consolidation, or credit counselling before they reach that stage.
Myth #5: People with high incomes don’t have credit card debt
Reality: It’s a common stereotype that only people with low incomes struggle with credit card debt. In reality, Canadians across all income levels experience financial stress. Many middle- and high-income earners carry large balances due to lifestyle inflation, spending more as their income rises. Having multiple credit cards or using credit to maintain a certain lifestyle can quickly lead to significant debt, even for those earning six figures.
Data from Statistics Canada shows that the average household debt-to-income ratio remains high across all brackets. The issue is not how much you earn but how you manage your spending and repayment habits. Building healthy credit habits, such as budgeting, tracking purchases, and paying off balances regularly, is key to maintaining financial stability regardless of income level.
Myth #6: You can’t get a credit card again if you’ve filed for bankruptcy
Reality: Filing for bankruptcy can feel like the end of your financial future, but that’s far from true. Bankruptcy affects your credit score and remains on your report for six to seven years, but it does not permanently prevent you from getting credit again. In fact, many Canadians begin rebuilding credit soon after discharge.
Many financial institutions offer secured credit cards, where you provide a deposit that acts as your credit limit. Using these responsibly and paying on time helps rebuild a positive payment history. After one to two years of consistent use, you may qualify for regular unsecured credit cards again. Licensed Insolvency Trustees (LIT) and credit counsellors can help set up a plan to rebuild financial health after bankruptcy.
Myth #7: People can figure out credit card debt on their own.
Reality: Most people cannot manage credit card debt alone and often need professional help. As of early 2025, about 46% of credit cardholders in Canada carry balances month-to-month, with many struggling with budgeting, understanding interest, and repayment strategies. Credit counselling organizations provide expert guidance to create personalized plans that can help reduce stress and improve financial outcomes. This is crucial support, given that nearly one in three households carries credit card debt, and about 23% are using over 80% of their credit limits. Without help, people may face prolonged financial hardship and a higher risk of missed payments.
Many individuals struggle with stress, anxiety, and even mental health issues related to their debt. Expert advice helps avoid the pitfalls of guesswork and misinformation, making recovery from debt more transparent, manageable, and consistent. Debt counselling improves outcomes and reduces related mental health risks significantly.
Practical tips for credit card debt relief
If credit card payments are becoming unmanageable, there are several practical ways to find relief and regain financial control:
- Consider contacting a credit counsellor or LIT to assess your situation and discuss options.
- Do your own research into consumer proposals or bankruptcy if your debt level is severe; these are legal processes that can reduce or eliminate unsecured debt.
- Consider a Debt Management Plan (DMP) through a non-profit credit counselling agency. It can consolidate multiple card payments into one monthly payment, often at reduced or frozen interest rates, while ensuring the full balance is repaid.
- Remember that you can always rebuild your credit over time after any debt discharge by using secured credit cards or low-limit products responsibly.
- Switch to lower-interest-rate credit cards or look for introductory 0% interest balance transfer offers to reduce interest costs.
- Pay a few extra dollars towards your credit card whenever you are able to. The “extra” helps pay off the principal, so you’re making quite a dent in your total payments. Over time, even $10 every month adds up!
- Follow a realistic budget that prioritizes debt payments using the avalanche (highest interest first) or snowball (smallest balance first) repayment method.
Key takeaways
Credit card debt relief is about knowledge as much as financial action. Myths and misinformation can delay progress or create unnecessary fear. In Canada, debt can be managed transparently through clear options such as debt consolidation, consumer proposals, or credit counselling. You won’t go to jail for unpaid credit cards, and your financial future remains rebuildable after hardship.
The most important step is to seek objective help early. Trusted resources include the Financial Consumer Agency of Canada (FCAC), credit counsellors, or a Licensed Insolvency Trustee. Taking informed action today can help you secure a debt-free and financially stable tomorrow. If you’re currently dealing with debt, you can contact one of our trained credit counsellors for advice – they can help you figure out which debt solution could be the right fit for your specific situation.
