Reduce Credit Card Debt on a Budget

Budgeting and planned action could help you tackle your debt on your own

Carrying big credit card balances can put a lot of strain on your finances, your family, and your health. Putting any amount of effort toward reducing these debts will be good for you, your stress and will also improve your credit rating (“amounts owed” accounts for nearly one-third of your score).

You don’t need to completely overhaul your lifestyle to reduce your credit card debt, but you will have to become more disciplined with your money each month. However, some debts may be simply too large to handle on your own, and you may wish to speak with a trained credit counsellor by calling or by taking our Free Debt Analysis. We’re here to help.

Why Reduce Credit Card Debt?

In most cases, credit card debt is unsecured revolving debt, which makes it a perfect choice when you want to target reducing your debts. Unlike secured debts like mortgages and car payments, unsecured debts carry higher interest rates and you can save a lot of money in the long run if you focus on repaying them.

There’s a cumulative benefit to paying down your credit card debt too. As you lower your balance, your monthly payments will start going down. This will free up extra money to accelerate your debt payments, increase your savings, or build an emergency fund.

Reduce Debt Strategically

Strategic thinking will get the most out of your money and help you pay down debt quicker. You’ll have to do some preliminary work and scrutinize your monthly budget. See if you can cut back on some of your discretionary payments, such as entertainment or restaurant spending, or even look for alternative ways to get the same products and services you use on a regular basis at a lower cost. This will allow you to free up some extra money for debt repayment.

You should also examine your individual debts and take stock of balances and interest charges. Determine how long it will take to pay off each debt if you only pay the monthly minimums; our debt calculator can do the math for you.

Once you have the numbers in front of you, you’ll be able to single out the biggest debt-offender and focus your energy toward it. Try using one of these common repayment methods:

  1. Pay off the highest interest rate account first. This method focuses on paying high interest accounts first so that you can eliminate them and save yourself from their additional interest charges.
    1. Identify your card with the highest interest rate.
    2. Continue to make the minimum monthly payments on your other cards.
    3. Rework your budget and pay as much as you can above the monthly minimum towards repaying this debt.
    4. Once paid off, take the money that would normally go toward that account and choose the credit card with the second highest interest rate.
    5. Continue this until you are completely debt free.
  2. Pay off your smallest balance first. You can always try working from the bottom up. Your high interest cards may be too daunting because they often carry the biggest balances. While this is not as efficient as paying off the card with the highest interest rate, knocking off some of the smaller debts will free up money and help you build the momentum that you need in order to tackle your bigger debts. Use the same strategy as above, but start with the smallest credit card balance first.
    1. Identify your credit card with the lowest balance.
    2. Make the minimum payments on all of your other credit cards.
    3. Rework your budget and pay as much as you can above the monthly minimum towards repaying this debt.
    4. Once you pay it off, use the extra money and put it towards paying off the next-smallest balance debt.
    5. Continue until you have paid off your credit cards.

Seeking Help

It’s possible that these strategies may not be enough to pay off your credit card debts. Maybe you have too many cards, or maybe you can’t afford all of your monthly payments. If it seems like you can’t tackle your debt on your own, let us guide you through the process. Don’t be afraid to reach out to our trained credit counsellors by calling . They’ll assess your situation and tell you the best way to conquer your debt, and their expert advice is free. We also invite you to try it online, by taking our Free Debt Analysis to get the ball rolling.

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