Managing Your Personal Finance: How to Pay Off Credit Card Debt in 5 Steps

by | Feb 23, 2026

It’s February, and 2026 is truly underway. My credit card and other bills from the holidays have come due, and I’d be lying if I said I was not at all surprised with my bank statement. No matter how much I plan, or when I start planning, I always end up finding some ways in which I overspent, or some unexpected expense that has crept up, driving my credit card bill higher than I’d anticipated.

From casual conversations with friends, I have come to realize this is not unique to me. Even a casual glance at social media will reveal a plethora of content around how to reduce debt, answering questions around credit card debt. And now, with the proliferation of “Buy Now, Pay Later” options, experts worry that more Canadians are being saddled with debt burdens.

3 Common Credit Card Myths

This is often coupled with widespread misinformation around credit card debt, especially as it relates to your credit score. Here are three misconceptions around credit cards and debt that I think you should know:

1 | Carrying a Credit Card Balances Helps to Improve My Credit Score

This is not true. You don’t need to carry debt to earn a high credit score, you need to pay off the debt on time and not use too much debt all the time. According to the Government of Canada website, you should try to use less than 30% of your available credit, because if you use a lot of your available credit, lenders see you as a greater risk, even if you pay your balance in full by the due date. If you carry a balance on your credit card, all you end up doing is paying more interest, which doesn’t help anyone but the credit card issuer. Which leads to the second misconception –

2 I Only Need to Make Minimum Payments and I’ll Be Fine

If you only make minimum payments, you’ll end up with crippling interest costs. According to J Douglas Hoyes of Hoyes & Michalos Debt Relief; “On a $5,000 credit card balance at 19.99% interest, making only minimum payments of 3% would take over 18 years to pay off and cost over $7,000 in interest charges alone.” In my opinion, the reason so many people believe this is because of the third misconception they have around credit cards.

3 | Credit Cards are Free Money

I was talking to my niece’s friend a few weeks ago, who’s heading off to university. As we were talking about what she’s planning to do, and how, she mentioned that she would be getting her first credit card, which (according to her) meant she would get a “allowance” of $1500 from the bank. I had a moment of panic, especially when my niece nodded along. No, a credit card is not free money, or an allowance. It is a loan that needs to be paid off in full every month, otherwise, you could end up in a mountain of debt.

How to Pay off Credit Card Debt in 5 Steps

If this resonates, or even if you’re worried that it might come close to home for you or loved ones, you should probably start thinking about debt reduction right now, and according to me, one of the first places to start is credit card debt, mainly because oftentimes, the interest rates on credit cards can be much higher than bank loans.

I have a five-step method that I use with my credit card debt.

  1. Know exactly how much you owe
  2. List out all your debts in two separate lists – yes, all debts in two lists
  3. Decide what repayment method works best for you
  4. Start paying off the card/s according to whatever method you chose
  5. Keep track.

Let’s take each of these in turn.

First: Know How Much You Owe

This can be hard, but it is essential you know exactly what you owe before you start on your debt tackling journey. Make a list of all your credit cards, and what you owe on each of them. Include the credit limits, the interest rates, the balances on each, and any other information you deem necessary. Then total it all and sit with the final figure for a minute or two. In some cases, the number might be wholly expected. In others, it could be higher, or even lower. But knowing exactly how much you owe is the first step on the journey to paying it off.

Second: Make TWO Lists of ALL Your Debt

I always make two separate lists of everything I owe. The first list is arranged in order of amount owed, starting from the highest and going down to the lowest. The second list is arranged in order of interest rates, with the highest interest rate cards going up top, and the lowest ones at the bottom. Knowing this information is crucial for the next step, which is –

Third: Decide How to Pay it Off

There are multiple ways in which you could consider paying off your debt. Two common ones are the debt avalanche and the debt snowball methods of paying off debt. We will talk about this in detail in another column, but in short, for both methods, you start by paying off the minimum balances on all cards, but what happens next varies. For the debt avalanche method, you tackle the highest interest rate debt first, because this debt will cost you the most. In the debt snowball method, you pay off the smallest debt first, so that you get a quick win and can build motivation to tackle the harder things. Which of the two you choose depends on what would work best for your style. There also is a third method, especially if your debts are of a large amount, and spread over many cards – you could consolidate all your outstanding debt into one and then pay off a single loan. Whichever method you choose, having a strategy is the third step.

 Fourth: Start Paying Off Your Debt

This is important. I have heard of more than one person who was very satisfied after getting to a plan, but then lost steam and either forgot, or neglected to implement it. One of the ways in which you can lower the odds of this happening is to set up an automatic payment of your credit card bill. That way, it is taken care of without you doing anything. I am also going to sneak in another step here – while you’re paying off your debts, try hard to not rack new debt on, because if you do, you’ll have to add it back into your step one and go from there.

Fifth: Keep Track

Keep track of your spending, saving, and repaying. If you know exactly what is going on with your money, chances are you can make better decisions on whether you should take on more debt or not.

Conclusion

Debt is a deeply personal journey, and this is one of the ways in which you could start tackling your own situation. Once you have your debt under control, and you’re ready to start saving and investing, you could consider Harvest Portfolios, with our comprehensive suite of ETF offerings and dedication to investor education, we are primed to be your ally in your financial journey. We have equity portfolios that focus on established businesses, leading themes, and secular trends across sectors, combined with an active covered call strategy to provide a dual approach of generating high monthly income and long-term capital growth. Whether you prefer Canadian single stocks, or US, balanced asset allocation funds, or diversified income ones, there’s something for everyone! Come take a look at our product line up!

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This communication should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. The information is meant to provide general information for educational purposes.  Tax, investment and all other decisions should be made with guidance from a qualified professional.

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