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Credit Cards

Consolidation3 min readFebruary 11, 2026
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Credit cards are the most expensive form of debt for Canadian consumers, with interest rates typically ranging from 19.99% for standard cards to 29.99% for store cards and cards aimed at higher-risk borrowers. In Canada, the minimum payment required is typically 2% to 3% of the balance or a fixed amount of $10, whichever is greater. This minimum payment is a formidable financial trap: a $10,000 balance at 19.99% repaid at the minimum would take over 30 years to eliminate and cost more than $12,000 in interest. Credit card debt has a direct impact on the debt service ratios (GDS and TDS) used by mortgage lenders, even though only the minimum payment is considered in the TDS ratio calculation. The AMF reminds that mortgage brokers in Quebec must evaluate all of the client's consumer debts in their qualification analysis. The optimal repayment strategy may include the avalanche method (paying off the highest rate first) or the snowball method (paying off the smallest balance first). Balance transfers at promotional rates are also an option, but come with conditions that must be well understood.

Credit Cards: Understanding the True Cost of Your Balances

Credit card debt is a major personal finance concern for Quebecers. With average interest rates of 19.99% to 29.99%, credit cards represent the most expensive form of debt after payday lending. Yet many consumers underestimate the real impact of these rates on their long-term financial situation, their credit score, and their mortgage borrowing capacity.

Typical Interest Rates in Canada

  • Standard cards (Visa, Mastercard): 19.99% to 20.99%, the most common rate in Canada for regular-rate cards.
  • Low-rate cards: 8.99% to 13.99%, in exchange for higher annual fees (generally $29 to $99 per year).
  • Store cards (The Bay, Canadian Tire, etc.): 25.99% to 29.99%, among the highest rates on the market.
  • Cards for higher-risk borrowers (limited credit): 25.99% to 29.99%, often offered to clients rebuilding credit.
  • Cash advances: regular rate PLUS an additional 2% to 5%, with interest calculated from the day of the advance (no grace period).

The Minimum Payment Trap

The minimum payment is designed by card issuers to maximize interest revenue. Typically set at 2% to 3% of the balance (or $10, whichever is greater), it barely covers the monthly interest, leaving the principal virtually untouched. The issuer is required by Canadian regulation to display on each statement the time needed to repay the balance at the minimum payment. This figure is often shocking for consumers.

Impact on Mortgage Qualification

For borrowers seeking a mortgage, credit card debt is a major obstacle. Lenders typically include 3% of each card's balance in calculating the total debt service (TDS) ratio, which must not exceed 44% under OSFI guidelines (B-20). Even if you pay your balance in full each month, a balance reported to the credit bureau at the wrong time can affect your qualification. AMF-certified mortgage brokers in Quebec recommend keeping each card's utilization below 30% of the limit.

Effective Repayment Strategies

  1. Avalanche method: Rank your cards by interest rate, from highest to lowest. Make the minimum payment on all cards except the one with the highest rate, on which you pay the maximum possible. Once that card is repaid, apply the freed-up amount to the next one. This method minimizes total interest costs.
  2. Snowball method: Rank your cards by balance, from smallest to largest. Pay off the card with the smallest balance first for a quick win and to maintain motivation. The positive psychological effect can offset the additional interest cost compared to the avalanche method.
  3. Balance transfer: Transfer your balances to a card offering a promotional 0% rate for 6 to 12 months. Divide the total balance by the number of promotional months to déterminé the required monthly payment. Warning: a missed payment can retroactively cancel the promotional rate.
  4. Mortgage consolidation: If you are a homeowner with sufficient equity, mortgage refinancing or a HELOC can reduce your rates from 19%+ to 5-7%. Evaluate this option with your AMF-certified broker, considering refinancing costs and the risk of re-accumulation.

Consumer Rights in Quebec

In Quebec, the Consumer Protection Act (CPA) offers several protections to credit card holders. The issuer must clearly disclose the annual interest rate, fees, and conditions. The monthly statement must indicate the time required to repay the balance at the minimum payment. Consumers have the right to dispute unauthorized transactions. If you are experiencing financial difficulty, do not hesitate to contact your card issuer to negotiate a payment arrangement, or consult a non-profit credit counselling organization, such as ACEF (Association cooperative d'economie familiale), for free assistance.

Frequently Asked Questions

How much does the minimum payment on a credit card really cost?
A $5,000 balance at 19.99% repaid at the 2% minimum payment would take approximately 33 years to repay and cost over $7,700 in interest, for a total of $12,700 on an initial $5,000 purchase. This is why paying more than the minimum each month is essential.
Does my credit card debt affect my mortgage qualification?
Yes, directly. Mortgage lenders include 3% of your card balances (or the actual minimum payment if higher) in calculating your total debt service (TDS) ratio. A $20,000 balance therefore adds $600 per month to your obligations in the calculation. This can significantly reduce the mortgage amount you qualify for.
What is the best repayment strategy?
The avalanche method (prioritizing the card with the highest rate) is mathematically optimal because it minimizes total interest paid. The snowball method (paying off the smallest balance first) is psychologically motivating because it provides quick wins. Choose the one that best matches your personality.
Are promotional balance transfers worth it?
Balance transfer offers at 0% for 6 to 12 months can be advantageous if you can repay most of the balance during the promotional period. Watch for transfer fees (1% to 3%), the rate that applies after the promotion (often 22.99%+), and conditions that cancel the promotion if a payment is missed.
Should I close my cards after paying them off?
Not necessarily. Closing a card reduces your total available credit, which can increase your utilization ratio and lower your credit score. It is often better to keep the card open with a zero balance, especially if it is an older card. Consult your AMF-certified mortgage broker for a strategy tailored to your profile.

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Educational information only. This does not constitute financial advice under the Act Respecting the Distribution of Financial Products and Services (LDPSF). Consult an AMF-certified mortgage broker before making any financial decision.

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