Credit Card Debt FAQ

Find answers to the most commonly asked questions about credit card debt and your relief options

If you are facing credit card debt, your financial future, your money and your credit are on the line. As a consumer, you want to know you have the right information so you are able to make informed decisions for your finances and future.

This Credit Card FAQ section is intended to help you find answers to the most commonly asked questions about credit card debt and your relief options. If you have further questions, we encourage you to give us a call at to speak with a trained credit counsellor who can assess your situation and provide individualized advice based on your financial situation. You can also take our Free Debt Analysis and a counsellor will get back with you soon.

Q: How does credit card debt affect your credit score?

If you make late credit card payments or miss payments altogether, this will have a negative impact on your credit score. If you feel like your credit score is being brought down by your debt and you are not able to pay off your the amounts due on time, give us a call and we can offer advice on how to pay off your debt faster so you can rebuild your credit history.

Q: When is penalty APR applied to a credit account?

Penalty APR is the annual percentage rate applied to your credit card account when you make a payment late, miss a payment, pay less than what is requested on your bill, or go over your credit limit on the credit card. Penalty APR is usually much higher than the standard APR on the credit.

Q: Are all debts the same?

No, not all debts are the same and they work very differently depending on the type of debt. Credit card debt is unsecured debt, while debt like mortgages and car loans are secured debts. Learn more about the difference between unsecured and secured debt.

Q: Why did my interest rate go up if I pay my bills on time?

When signing up for credit cards, there will sometimes be an introductory rate that can increase after an initial time period, particularly common with rewards cards. Overlooking these terms can be avoided by reading your contracts carefully. Additionally, your company may change your rate legally, as long as notice is provided to their customers. It is encouraged to read any fine print or notifications included in your monthly statement.

Q: How do I restore my normal APR once penalty APR has been applied?

Depending on the creditor, and even sometimes between different credit cards issued by the same creditor, the penalty APR period varies. Sometimes penalty APR can be cleared in only six months with consecutive payments made on time. Check with your creditor for penalty APR rules, or contact a trained credit counsellor at to discuss options on how to restore your standard APR.

Q: How do I prioritize what debts to pay off first?

It’s better to pay off all your credit card debts, but if you have extra money, focus on paying off the one with the highest interest rate. Since paying down credit cards reduces monthly statements, these are good bills to pay off first. Mortgage and car loan payments are fixed, so there is no great benefit in paying more than the amount that is due. If deciding between cards, pay off the card with the highest interest rate first.

Q: Collectors are calling me as I’ve fallen behind on my payments. What are my rights?

If you’ve fallen behind on payments, call right away and we can review your options together. You always have rights! The Collection Agencies Act protects your rights by setting guidelines for how collectors can communicate with you. Collection legislation will vary from province to province. Find out more about your credit rights under this act, as well as other Canadian privacy legislation.

Q: When is it time to seek debt relief?

Everyone has a different turning point for when they decide to seek help. Signs in your everyday life may push you forward, like not being able to afford the monthly payments for all of your debts, or maybe you are taking out cash advances to cover your bills, making you fall even further into debt every month. These danger signals indicate that you need to find a debt relief solution as soon as possible.

Q: Are debt consolidation and debt management the same?

No, however debt management is a type of debt consolidation because multiple unsecured debts are lumped into one low monthly payment. You may participate in a debt management program through a credit counselling agency instead of taking out a loan.

Q: Will all debt relief options negatively impact my credit score?

This depends largely on which debt relief option you choose and how successfully you are using that solution. Debt settlement and bankruptcy may produce penalties of 7 years or more on your credit report. Enrolling in a debt management program will only stay on your credit report for up to 3 years after you have paid off the debt. The effects of debt consolidation loans will vary depending on how quickly you pay back the loan. It is beneficial to consult with a professional before choosing a debt relief option. Call for a free consultation from a trained credit counsellor.

Q: How much credit card debt can I consolidate?

There is no maximum amount of debt for consolidation. Cases vary from client to client, and some have even consolidated over $70,000 in debt. It really depends on what kinds of debt you have and your personal financial situation. Call to speak to a trained credit counsellor who can assess your debts and advise you on your options.

Q: Is taking out a home equity loan to pay off my credit card debt a good idea?

Generally speaking, using a home equity loan to pay off credit cards is risky. Since a home equity loan is a secured debt, you can risk foreclosure and losing your home if you don’t make your payments on time. Always speak with a trained credit professional when weighing your options before taking out a home equity loan to pay off credit card debt.