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Tag: debt management

  • Holiday debt hangover: How to get your finances back on track

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    Recent surveys show a growing number of Canadians carry holiday-related debt into the new year and feel more financial pressure because of it. In this article, we’ll explain what’s behind this holiday hangover, why this type of debt has become so common, and provide practical steps to pay it down so you can get your finances back on track.

    The state of holiday spending & debt in Canada

    According to Spergel’s latest Financial Hangover survey, about half of Canadians (51%) carried new holiday debt into 2026, and nearly three in 10 are starting the year with over $6,000 in holiday-related balances. At the same time, 75% report feeling more financially stressed than in past years, and nearly one in five expect to fall behind on credit card payments.

    “These figures show how easily seasonal spending can morph into a long-term debt trap when you’re dealing with 19.99% or 29.99% APR. That ‘hangover’ doesn’t just go away, it grows,” says Ronique Saunders, Credit Canada Credit Counsellor. According to Spergel’s survey, nearly one in three Canadians say it will take six months or longer to recover financially from holiday spending.

    These impacts go beyond numbers on a statement. Carrying high balances increases your credit utilization, which can hurt your credit score and make future borrowing more expensive. High balances also trigger significant interest charges and monthly interest expenses, which can quickly drain your cash flow and increase the total amount you owe. And seeing a large balance month after month adds emotional stress, making it harder to save or plan for the rest of the year.

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    Many Canadians carry holiday debt into the new year because of a few common money habits. One is present bias—focusing on enjoyment now and pushing costs into the future. Another is optimism bias—expecting finances to recover without a clear plan. These habits are normal, but they can cause debt to stick around longer than expected, especially as credit card interest adds up.

    Step-by-step financial recovery strategies

    Understanding how common this “holiday hangover” is—and taking steps to tackle your debt—can help you regain control of your money and reduce both financial and emotional stress as the year begins. Here’s how to get started.

    1. Assess your current situation

    The first step to getting back on track is to figure out where your money stands. Pull out your January credit card and bank statements and tally up any holiday debt. Seeing the numbers in detail provides a foundation for every decision that follows.

    A helpful way to start is by creating a “financial photograph.” This is a snapshot of your finances at a specific point in time, showing what you own versus what you owe. To create a financial photograph, use a piece of paper or a spreadsheet and list everything you own (savings, investments, maybe a home) and then subtract what you owe, such as credit card balances or loans. This will give you a clear picture of your net worth, separate from your everyday budget.

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    “Understanding your complete financial situation allows you to identify, organize, and create a realistic plan to pay off what you owe,” says Saunders.

    2. Create a realistic 2026 budget

    Consider your budget a spending roadmap for the year ahead, taking into account a plan to reduce your holiday hangover debt. When creating a budget, you can use a budgeting app, spreadsheet or a simple piece of paper to list your income and expenses—including debt payments. Determine how much money you have to spend each month and compare it with how much you pay for various bills and items during that same period. This will help you identify where you can cut back. Those savings can then be directed to your debt so you can pay it off sooner.

    The goal is to allocate as much as you reasonably can towards the debt while still covering your necessary expenses. “A realistic 2026 budget doesn’t need to feel restrictive—it should simply reflect your values, priorities, and financial goals for the year ahead,” says Saunders.

    3. Prioritize high-interest balances

    Once you have a budget in place, you can analyze your cash flow to determine the best debt repayment strategy. Keep in mind that not all debt costs the same. Credit cards usually carry the highest interest rates, so paying them down first saves the most money over time. 

    Two common repayment strategies are the snowball and avalanche methods. The snowball method focuses on paying off your smallest balances first, giving you quick wins that build momentum. The avalanche method focuses on the highest-interest balances first, which reduces the total interest you pay and can shorten the overall repayment period. 

    Counsellor Tip: If your interest rates are over 20%, the avalanche method is almost always the better choice to stop the “bleeding” of your monthly income. 

    4. Increase cash flow

    Boosting the money you have available can speed up your holiday recovery. Look for temporary ways to earn extra income, such as freelance work, part-time jobs, or selling items you no longer use. You can also free up cash by reviewing subscriptions or non-essential spending and redirecting that money towards debt repayment. 

    5. Pay more than the minimum

    Minimum payments may feel manageable, but they keep you in debt longer and increase the total interest you pay. Whenever possible, aim to pay a larger portion of your balance—as much as your budget allows. 

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    Himank Bhatia

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  • Debt collection in Canada: What collectors can and can’t do – MoneySense

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    Debt collectors are obligated to follow specific rules about how they make contact and what information they can request; however, many Canadians aren’t sure where the line is between legal collection practices and harassment.

    Knowing these rules and what rights you have can turn a stressful situation into something you can handle with confidence. In this article, we’ll explain what debt collectors are allowed to do, red flags to watch out for, and steps you can take to protect yourself.

    Why debt collectors are calling you

    If a debt collector is contacting you, it usually means your account has passed the stage where the original lender can recover the money themselves. In Canada, creditors such as banks, credit card companies, and utilities typically begin with their own internal collections department when payments are missed. These internal teams are still considered debt collectors and must follow the same legal standards governing communication and conduct.

    Ideally, this is the stage where you should engage with the creditor, since resolving the issue early can prevent it from being transferred or sold to an outside collection agency. Typically, accounts are sent to external collections after about 90 to 180 days of non-payment. Once a debt reaches a third-party collection agency, that agency becomes your main point of contact—which explains why calls may start even if the original creditor has stopped reaching out.

    Understanding how this process works can help make the situation less overwhelming. “When you know who is contacting you, why they’re reaching out, and what your rights are, it’s easier to respond calmly and avoid being pressured into decisions that aren’t in your best interest,” says Craig Stewart, certified Credit Counsellor at Credit Canada.

    What debt collectors can do in Canada

    Debt collection rules vary by province; however, all collectors are required to follow Canadian consumer protection laws. Here is what they are permitted to do:

    • Contact you by phone, email, or mail: Collectors can reach out using standard communication methods, as long as they follow provincial limits on how often they can contact you.
    • Call only during permitted hours: Collectors can only call during certain hours, generally 7 a.m. to 9 p.m. Monday to Saturday, and 1 p.m. to 5 p.m. on Sundays (except for holidays). The rules vary by province.
    • Ask you to repay a legitimate debt: They are permitted to explain the amount you owe and discuss possible repayment options, as long as the information is accurate and the communication stays professional. They cannot mislead or pressure you to pay.
    • Contact your employer for limited reasons: Collectors can call your current employer to confirm your employment status, job title, or work address, but they cannot discuss your debt with your employer.

    Have a personal finance question? Submit it here.

    What debt collectors cannot do (this is harassment)

    Even though debt collectors are permitted to contact you, Canada has firm limits on how they can behave. If a collector crosses the following lines, it’s considered harassment and, in many cases, a violation of provincial law. “Understanding these rules helps you know your rights and navigate the situation without feeling intimidated,” says Stewart.

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    Here’s what collectors are not allowed to do:

    • Threaten, intimidate, or use abusive language: Collectors must speak respectfully and cannot yell, insult, or make illegal threats.
    • Contact your friends or family about the debt: They are not allowed to discuss your debt with anyone except you, your spouse, or a co-signer. 
    • Call excessively or outside permitted hours: Repeated calls meant to annoy or pressure you are not allowed, and collectors must follow provincial calling times.
    • Misrepresent who they are: A collector cannot pretend to be a lawyer, a government official, or law enforcement. They must clearly identify themselves and the agency they work for.
    • Add unauthorized fees: Collectors cannot tack on interest, penalties, or collection fees unless the original contract or provincial law allows it.
    • Pressure you to borrow money: They cannot encourage you to take out new, high-interest loans to pay off old debt.

    If a collector engages in any of these behaviours, it is considered harassment and you have the right to file a complaint or seek help from a non-profit credit counsellor.

    How to take back control when dealing with a debt collectors

    Dealing with debt collectors can be stressful, but there are steps you can take to stop the calls and regain control.

    Step 1: Confirm the debt is legitimate

    Always ask the collector to provide details in writing, including the original creditor, amount owed, and how it was calculated. Check your credit report to verify the debt, and do not make any payments until you’re sure it’s valid. “Always ask for the debt in writing before paying anything. Sometimes people are contacted about old debts that have already been paid, or even mistakes on their credit report,” says Stewart.

    Step 2: Keep a record of all interactions

    Write down the dates and times of calls, the names of callers, the agency they work for and what was discussed. Maintaining a detailed record can help if you need to challenge the debt or file a complaint.

    Step 3: Engage early to explore repayment options

    If the debt is still with the original lender’s internal collections department, engaging early often gives you more flexibility. You may be able to:

    • Set up a payment plan that fits your budget
    • Negotiate a lump-sum settlement

    Different creditors have different guidelines for what they will accept on an account in collection, but you may be surprised at how willing some creditors and collection agencies are to settle for a reduced amount. Your options will ultimately depend on the creditor, the age of the debt, and whether it has been transferred or sold to a collection agency.

    When negotiating, explain your current financial situation and offer a payment that works for your budget—the shorter the term and higher the payment the more likely they are to accept your offer. Remember to always get any final agreement in writing

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    Mike Bergeron

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  • Credit card interest calculator – MoneySense

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    Play around with our credit card interest calculator to calculate credit card interest and figure out how long it will take you to repay the debt. This tool can help you develop a plan to address your balance and avoid paying interest going forward.

    How to use the credit card interest calculator

    Our credit card interest calculator can help you figure out two key pieces of information: 

    • How much money you’ll pay in interest based on your current monthly payment
    • How many months it will take to pay off your credit card balance

    Start by inputting your credit card balance and your card’s annual percentage rate (APR). If you don’t know this number, log into your credit card account and pull up your card’s terms and conditions. 

    Next, decide if you want to see how much total interest you’ll pay based on your current monthly payment (and enter that amount) or specify your payoff goal in months to see how the total interest charges.

    How to calculate credit card interest

    Since interest is expressed as an annual percentage rate, card issuers take several steps to determine how much to charge each month. Here’s how you can figure out their method:

    1. Convert your APR to a daily rate. Most issuers charge interest daily, so divide the APR by 365 to find the daily periodic interest rate. Make sure you’re using the purchase interest rate (not the cash advance or balance transfer rate).
    2. Figure out your average daily balance. Check your credit card statement to see how many days are in the billing period. Then, add up each day’s daily balance, including the balance that carried over from the previous month. Once you have all the daily balances, divide the figure by the number of days in the billing period to find your average daily balance.
    3. Multiply the balance by the daily rate, then multiply the result by the number of days in the cycle. Now that you have all the details you need, multiply the average daily balance by your daily periodic interest rate. Then multiply that number by the number of days in the billing cycle. This shows you how much interest you’ll pay in a month.

    A quick example

    If you have a credit card with a $1,000 balance and 20% APR, your daily interest rate would be 0.0548%. Assuming you don’t add to the debt, you’ll be charged around $0.55 in interest every day. If there are 30 days in the billing cycle, you’ll pay $16.50 in interest for the month.

    How to avoid paying credit card interest

    When you get a credit card statement each month, you’ll see a minimum payment amount listed. This is often a flat rate or a small percentage of your balance (usually 3%), whichever is higher. 

    While it’s tempting to just pay the minimum payment your credit card issuer asks for, doing so guarantees you’ll be charged interest because you’ll be carrying a balance into the following month. 

    Instead, make a point of paying off your balance in full every month. Not only will you avoid paying credit card interest, but your card issuer will report these payments to the credit monitoring bureaus, which can boost your credit score. Plus, the cash back or rewards you earn with the card won’t be offset by the interest you’re charged, so you truly get more out of using your card.

    How to reduce credit card debt

    If you already have a credit card balance, don’t despair. There are strategic things you can do to get out from under credit card debt.

    1. Negotiate with your credit card provider

    As a first step, call your bank or credit card provider to request a lower interest rate. Your card issuer may be willing to work with you, so don’t hesitate to ask. They might agree to lower your rate, offer to switch you to a lower-interest card, or create a repayment plan that works for your situation—but you’ll never know if you don’t ask.

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    2. Make a budget and pay with cash or debit

    It’s important to honestly track your income and expenses so you can trim unnecessary costs. Stop charging purchases to your credit cards and switch to cash or debit, instead.

    While it might seem difficult, try to contribute to an emergency savings fund. If an unexpected expense comes up (like an appliance repair or vet bill), you can pull from your fund rather than charge it to your credit card.

    3. Open a balance transfer credit card

    If you have significant debt, find a balance transfer credit card with a great promotional rate. Then, move your existing balance to the card. You can quickly pay down the balance while you’re not being charged interest. The golden rule of balance transfer cards: never charge new purchases to the card.

    Canada’s best credit cards for balance transfers

    4. Try the avalanche or snowball repayment strategy

    There are two main approaches to paying off debt:

    • Avalanche method: Focus on paying off the debt with the highest interest rate first, while making only the minimum payments on your other accounts. Once the highest-interest debt is paid off, move on to the next-highest-interest debt.
    • Snowball method: Start by paying off the debt with the smallest balance first, while continuing to make minimum payments on your other debts. After clearing one debt, move to the next-smallest balance. This method may cost more in interest over time, but it can provide strong motivation and momentum to stay on track with debt repayment.

    5. Work with a credit counselling agency.

    It’s completely understandable to feel overwhelmed by your credit card debt, which is why a credit counsellor can be so helpful. Speak to representatives from your financial institution, a credit counselling agency, or a debt consolidation program to discuss your options. They can help you create a tailored plan to resolve the situation.

    5. Consider debt consolidation.

    If you’re juggling multiple loans and credit card balances and having trouble paying them off, it may make sense to consolidate your debt. This means combining two or more debts into one, with just one payment to make each month.

    Another option is a debt consolidation loan from a bank or other financial institution. Or you could work with a credit counselling agency to negotiate a debt consolidation program (DCP) or consumer proposal (repaying only part of your debt) with your lenders.

    Learn more about each of these options by reading “How to consolidate debt in Canada” and “Who should Canadians consult for debt advice?”

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    Jessica Gibson

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  • How to manage debt when you’re between jobs in Canada – MoneySense

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    In July 2025, Canada’s unemployment rate hovered around 6.9%, with youth unemployment reaching 14.6%. Two in five Canadians say they’re worried someone in their household could lose their job, the highest level of job loss anxiety ever reported, according to MNP. At the same time, 42% of Canadians say money has been their biggest source of stress this year, and nearly half are losing sleep over it. 

    If you’re in between jobs and worried about how to cover your bills, protect your credit, or figure out what kind of help is available, you’ve come to the right place. In this article, we’ll walk you through how to prioritize payments, negotiate with creditors, and access unemployment relief programs so you can keep things manageable while you search for your next opportunity.

    The first 48 hours: Triage your finances

    The first few days after losing your job can feel overwhelming, but taking a few simple steps can help you regain a sense of control. 

    Start by adjusting your current budget or making a bare-bones budget that covers only essentials: housing, utilities, groceries, phone, internet, transportation, and minimum debt payments. Factor in any income you expect to have during this time, such as severance, emergency savings, or Employment Insurance (EI). This gives you a clear picture of what you need and where you might need to cut back.

    Then, you’ll want to prioritize your expenses. Make housing your top priority, which includes rent or mortgage and utilities, then add in basic food costs and health needs. Secured debts (loans tied to assets, such as a vehicle) come next, followed by unsecured ones like credit cards. 

    Once you’ve got the essentials covered, you can look at any non-essential costs that you can trim. “Prioritize housing, utilities, food and transportation. If money is tight, try your best to keep secured debts current, as it is easier to negotiate with unsecured ones,” suggests Mike Bergeron, Credit Counselling Manager at Credit Canada. 

    It may be tempting to rely on payday loans or high-interest credit, but these can trap you in a cycle of debt. Safer alternatives might include taking an installment loan from a bank or credit union, talking to a non-profit credit counsellor about debt consolidation, or exploring hardship options with your lenders. While not all debts carry the same risk, be aware that missing payments can lead to added fees, damage to your credit score or collections.

    Read more: How to consolidate your debt

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    Speaking to creditors: When to reach out and what to say

    If you’re struggling to make payments, contact your creditors as soon as possible. It may feel uncomfortable, but reaching out early can open the door to options that help lower your payments and protect your credit. Many lenders offer hardship programs like reduced interest, lower minimums, or payment deferrals—but they won’t offer them unless you ask.

    “One of the most common mistakes I see people make is avoiding their creditors when they lose their job,” says Bergeron. “The earlier you communicate your situation, the more options you’ll have. Most creditors would rather work with you than send your account to collections.”

    When you get in touch, be direct and honest. You could say, “I’ve had a loss of income and want to keep my account in good standing. What hardship options are available?” Before agreeing to anything, ask: “Can you confirm how this will affect interest, fees, and my credit report?” If you’re offered a deferral or payment plan, clarify how long it lasts, whether interest continues, and when regular payments resume. Always get the full agreement in writing. This helps avoid surprises and gives you something to refer back to later.

    If your account has already gone to collections, know your rights. Collectors must follow provincial laws and cannot harass or threaten you. You can ask them for details about the debt and any payment options, just like you would with a creditor. Stay calm, ask for everything in writing, and don’t feel pressured to agree to anything on the spot. Consult a credit counsellor if you need help dealing with collections.

    Available support: Accessing government and non-profit resources

    If you’re between jobs, there are programs across Canada that can help. Start by applying for EI as soon as you stop working, even if you haven’t received your Record of Employment yet (processing can take a few weeks). “Ensure that you have enough income coming in to support your expenses around the house, keep a roof over your head, and keep food on the table,” says Randolph Taylor, a certified Credit Counsellor with Credit Canada. Each province also offers its own emergency or income assistance programs that may help with urgent needs like rent, utilities, or basic living costs, depending on your situation. 

    You may also be eligible for utility relief programs, offered by many hydro and gas providers across the country, which can include bill deferrals, payment plans, or seasonal discounts. For help with day-to-day essentials, food banks, and community organizations can provide groceries and supplies with no cost or judgment. These resources are designed to support Canadians through temporary hardships like job loss.

    If you’re struggling to manage debt while unemployed, consider reaching out to a non-profit credit counselling agency like Credit Canada for free one-on-one financial coaching and review your income, expenses, and debts to help build a realistic plan for your situation. Credit counsellors can walk you through options like debt consolidation, contact creditors on your behalf, and provide educational and budgeting resources.

    Prioritizing payments: Which debts to handle first

    When money is tight, it’s important to focus on the debts that carry the most risk. Start with secured debts, like your mortgage, rent, or car loan. Since secured debts are tied to an asset, missing these could lead to eviction, foreclosure, or losing your vehicle. If you’re falling behind, contact your landlord or lender early to ask about deferrals, rent relief programs, or adjusting your repayment plan.

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    Doris Asiedu

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  • What is the best way to pay down debt? – MoneySense

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    Many Canadians have debt of different amounts and for many different reasons. Common types of debts can include car loans, credit card debt, lines of credit and personal loans, and mortgages. 

    Canadian consumer debt reached $2.54 trillion in the third quarter (Q3) of 2024, according to credit bureau Equifax Canada. That’s a 4% increase from the same period last year, with non-mortgage debt up 3.8% from Q3 2023. The average consumer debt is $21,810, up $796 from the year before. Overall credit card debt continued to rise in 2024 (up 9.4% over 2023), partly due to population growth and partly because Canadians are carrying a higher average balance. 

    The reality is that a lot of Canadians are struggling financially. A recent survey by insolvency trustee Harris & Partners shows that 57% of those who responded said their income is not enough to cover basics like rent, food, and utilities. Many Canadians are therefore increasingly relying on credit cards, other kinds of consumer credit, and support from family to make ends meet.

    There are a few common debt repayment strategies, and which one to choose depends mostly on your personality. Consider your unique situation and money challenges and patterns to help you determine which solution might be the best for you. Here are 4 to consider.

    The debt snowball method

    If you are motivated by accomplishments, then you might like the “debt snowball” strategy. Using this approach, you continue to make just your minimum payments on all outstanding debts and then use any surplus money to pay off the debt with the smallest dollar value first (regardless of interest rate). For example, let’s say you focus on paying off a $3,500 personal loan with an 8% interest rate. It might not be your biggest debt or your highest-interest debt, but you can feel good about paying it off. Then you tackle your next smallest debt amount—say, a $11,000 credit card balance with a 21% interest rate—and start the process again until all outstanding debts have been repaid.

    The debt avalanche method

    Maybe you’re more motivated by saving on the interest you’re paying. In that case, you would use the “debt avalanche” strategy, where you pay the minimums on all debt but pay any surplus money each month to the highest-interest rate debt first—regardless of the debt amount. In the above example, that would be the $11,000 credit card debt with an interest rate of 21%. Once you’ve paid that off in full, then you pay off the next highest-rate debt (the $3,500 personal loan at 8%), and so on, until all of your debt is paid off. 

    Each strategy to pay down debt has its own good points. For instance, the debt avalanche strategy saves you more money in interest costs, while the debt snowball approach may keep you more motivated based on the quicker, small successes along the way. Setting timeline goals, which detail exactly how long you will take to pay off each debt, will help to keep you focused so you keep pursuing your goals. Ensure you continue to pay the minimum balances on all debts so they won’t reduce your credit score, incur more interest, or (worst case) lead to the cancellation of your credit cards.

    Balance transfer to a lower-interest credit card

    Another solution, if you qualify, is that you may be able to transfer some or all of your credit card balance to a new lower-interest credit card (sometimes zero interest, if you have a really good score). This still requires consistent, on-time payments, but you will accumulate less interest.

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    Some credit card rates are special “promo” rates only offered for a limited time, typically 6 or 12 months after you sign up. At the end of the special offer period, the rates will return to the regular higher rates—check the fine print to find out how much. While you have the lower rates, though, you won’t incur much (if any) new interest, so your payments will be directed to the principal. This helps to decrease the balance at a quicker pace than if you were also paying interest.

    You may be able to consolidate several smaller-balance cards with this promo offer and then make just one monthly payment. But take note: this strategy takes discipline! Make sure you focus on paying as much down as you can during the promo period and avoid creating new debt.

    Canada’s best credit cards for balance transfers

    Debt consolidation loans

    If you prefer a more structured system to pay down debt, maybe a debt consolidation loan would work best. It gives you a fixed interest rate and a fixed payment amount—usually paid every month—over a fixed period of time. This may allow for better cash flow planning because you will know exactly what amount your debt payment will be each and every month for a very specific period of time. 

    Above all, think about how great it will feel when your debt is repaid and eliminated. Keep this top of mind as you move forward to zero debt and, eventually, a longer-term savings plan.

    Each strategy to pay down debt has its own good points. For instance, the debt avalanche strategy saves you more money in interest costs, while the debt snowball approach may keep you more motivated based on the quicker, small successes along the way. Setting timeline goals, which detail exactly how long you will take to pay off each debt, will help to keep you focused so you keep pursuing your goals.

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    About Janet Gray


    About Janet Gray

    A Certified Financial Planner with over 20 years of experience, Janet is an advice-only planner with Money Coaches Canada since 2014. She is regularly featured on CBC, Globe and Mail, Toronto Star, and more.

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    Janet Gray

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  • Managing debt to build wealth – MoneySense

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    But it’s not all bad news behind the dire headline—and there is an opportunity to help young people, in particular, understand the difference between good debt and bad debt.  

    So, where’s the good news? 

    Total consumer debt in Canada was $2.55 trillion at the end of the first quarter (Q1) of 2025, up 4% year-over-year. That’s a huge number—and interestingly, almost twice the federal government’s record-setting debt of just over $1.4 trillion. 

    Still, that consumer debt number is down more than $6 billion from the end of 2024. While average non-mortgage debt rose to $21,859 per person in Q1 2025, there may be some valid reasons for it. 

    Age is a factor in debt acquisition

    Debt, statistically, is a recurring issue for younger people. It makes sense that as people age, debt reduces—particularly when it comes to mortgage debt. Still, it is surprising how long both student debt and consumer debt linger, well into pre-retirement, as shown in the below data from mid-2024.  

    One of the key culprits right now, especially for young people, is a strong auto loan market, according to the Equifax Canada Market Pulse Quarterly Consumer Credit Trends and Insights Report. There may be valid reasons for this.

    Car buyers appear to be reacting to the tariff tax issue, wishing to lock in their purchases before anticipated price hikes. To know if you can really afford a vehicle, do the credit math up front—and include not just the sticker price, but also the interest over the life of your car loan. How can you reduce that?  

    Seeking help from a tax or financial advisor to understand whether your car loans will be tax-deductible can also help reduce the after-tax cost. Some operating costs, like gas and oil or EV charging,  and a portion of fixed costs like interest or capital cost allowances may be written off, with proper documentation, when the vehicle is used for employment or self-employment purposes. Speak to a tax specialist about that. (Also read: How to save on your taxes with automobile logs.)

    The mortgage math

    New mortgage applications jumped 57.7% year-over-year in Q1 2025. That’s due in large part to the number of mortgages that have come up for renewal and refinancing, many at higher interest rates. It is also interesting to note that first-time home buyers returned to the market, with activity up 40% from a year ago. 

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    But while average monthly payments may now be dropping due to current lower interest rates, the average loan size is increasing—by 7.5% year-over-year. It’s important to consider what the next renewal cycle might look like for today’s new debtors.

    According to Bank of Canada research, 60% of those with mortgage renewals in the next two years will face payment hikes. The factors that push interest rates higher include things like high inflation, low savings rates, decreasing trade, a decrease in labour productivity, high government debt, and the risks of default. Many of those factors are in play today.

    You’re 2 minutes away from getting the best mortgage rates.

    Answer a few quick questions to get a personalized quote, whether you’re buying, renewing or refinancing.

    Delinquencies: They’re in non-mortgage debt

    When it comes to credit delinquencies, however, financial strain is actually worse for consumers who don’t hold mortgages. In this cohort, delinquency rates rose 8.9% year-over-year, compared to 6.5% for mortgage holders. Again, younger Canadians—those 18 to 25—were hit hardest, experiencing a 15.1% increase in delinquency rates.

    On the positive side, the average monthly credit card spend per card holder fell by $107 during Q1 2025, which is the lowest level since March 2022.  

    Remember, not all debt is bad debt. When it comes to judging good debt vs. bad debt, there are a couple of simple but important rules:

    • Borrow for assets that appreciate. If you must buy a depreciating asset, make sure it is income-producing—that it helps you earn income from employment or self-employment, or from other investments like a business or rental property. 
    • Consider whether the interest is tax-deductible. Consumer debt, for example, is bad debt—it’s expensive and not tax-deductible. Pay it off first unless you owe money to the Canada Revenue Agency (CRA), in which case that amount owed takes precedence.
    • Borrowing to invest in registered accounts is not deductible. An important tax tip is that interest on loans to invest in a registered retirement savings plan (RRSP), tax-free savings account (TFSA), first-home savings account (FHSA), etc. will not be deductible. Bear that in mind in your financial planning.

    Debt tips for better cash flow

    Here are some effective ways to manage debt and take back control of your net cash flow:

    1. Pay off high-interest, non-deductible debt as soon as possible. This includes credit card debt and high-interest loans, which can neither be written off on your tax return, nor used to build your net worth.

    2. Consider consolidating debt to pay off smaller amounts first. Get rid of “debt clutter” but keep two categories: tax-deductible debt and non-deductible debt.

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    Evelyn Jacks, RWM, MFA, MFA-P, FDFS

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  • How to fix bad credit history in Canada: 3 steps to boost your score – MoneySense

    How to fix bad credit history in Canada: 3 steps to boost your score – MoneySense

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    1. Review your credit report for errors

    It’s important to review your credit report and score at least once a year, especially when you’re trying to improve it. You can obtain your credit report and score through Canada’s two credit bureaus, a third-party service or your bank’s website or mobile app, as noted above. Doing so will not affect your score.

    Look over the report to see what’s documented and ensure the information is correct. You can remove incorrect information at no charge by filing a dispute directly with the credit bureaus. Errors in your report or instances of identity theft can cause your score to be lower than it should be and addressing these errors could increase it dramatically. Look for things like:

    • Errors related to personal details such as phone number, reported addresses, birth date and full name
    • Incorrect accounts due to identity theft
    • Balances on accounts that have been paid off
    • Unauthorized purchases due to fraud

    It can take time for errors to completely disappear from your credit report, so the sooner you address the issue, the sooner you can start the process of rebuilding your credit.

    Even if there are no mistakes, the report provides an overview of your accounts, offering insights into how to enhance your credit and better manage debt.

    2. Focus on paying down debt

    A history of consistently paying down debts is a good starting point for improving your credit, and it’s something you can immediately take action on. Even if you only have one big bill, it’s important to prioritize paying it down. Paying at least the required miniumum amount, on-time, every time, is crucial for your credit score. And remember that carrying debt is expensive, so you’ll want to try to pay off these debts in full as soon as possible by putting more money towards the outstanding balances.

    You can do this by creating a debt repayment plan using either the avalanche or the snowball repayment methods. Avalanche focuses on paying off the debt with the highest interest rate first. By prioritizing high-interest debt, you save money in the long run and can pay off your debts more efficiently. The Snowball method has you pay off the smallest debt first, which can provide quick wins and keep you motivated with each debt that gets knocked out. Each method has its pros and cons, so pick the one that best fits your financial situation.

    3. Watch out for credit repair scams

    Some companies claim they can fix your credit and solve your debt problems quickly—and you may be tempted to use their services if you have a less-than-perfect credit score. However, you can only rebuild credit—there’s no quick fix. 

    Credit repair companies may say they will fix your credit by removing negative information from your credit report to boost your credit score—for a costly, up-front fee. These companies often take advantage of the fact that many Canadians don’t know you accurate information cannot be removed from a credit report—even if it’s bad. Be cautious of companies offering credit repair services. It’s likely a scam if a company: 

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  • How to build credit history in Canada – MoneySense

    How to build credit history in Canada – MoneySense

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    How to get a credit card in Canada

    Well, you apply. But make sure you’re applying for the right card and that you have a high chance of being approved. You see, the credit card company will check your credit history, and that can affect your current credit score. So, don’t apply for a bunch and hope for the best, as that could make it look like you are at risk for having access to too much credit. The good news: There are many types of credit cards in Canada, including those for newcomers to Canada, students and even those with bad or no credit. Check out our rankings for the best credit cards in Canada for your situation.

    Once you have a credit card you will want to maintain good credit habits, like paying it off on time and paying more than the required minimum payment. Here are some other articles that will help you navigating your first credit card in Canada.

    Read:

    Why is credit history important?

    Say you want to rent an apartment. Your credit history is vital because most landlords will want to see your credit score and credit report to judge whether you’ll pay your rent on time. If you get the apartment, you’ll want an internet connection—and for this, too, the large providers will query your credit score.

    If you need to buy or lease a car, your credit history will not only determine whether you’re approved for a loan, but also what interest rate you’re offered: the higher your credit score, the lower the interest rate. Insurance companies may check your credit history before providing coverage. And finally, if you want to buy a home, your credit history is key to qualifying for a mortgage, as well as what mortgage interest rates lenders will offer. A lower rate could save you tens of thousands of dollars over the life of your mortgage.

    Read:

    How to build a good credit history when you have no credit history

    Credit history is usually built organically as people start using credit. In Canada, young people who have reached the age of majority (18 or 19, depending on where they live) can apply for a credit card and start building a history of borrowing and repayment.

    If you’re a newcomer to Canada, or if you’re a student, recent grad or young adult who doesn’t have much of a credit history, your credit score may be low—which is a hurdle in getting approved for credit. It’s a frustrating cycle—you need credit history to access credit, and you need credit to build that history. So, what’s the solution? Here are a few steps anybody can take to build their credit history:

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    Aditya Nain

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  • Personal loan versus line of credit: Which should you choose? – MoneySense

    Personal loan versus line of credit: Which should you choose? – MoneySense

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    Personal loans vs. lines of credit

    With a personal loan, you borrow a single (fixed) amount of money from a bank or other lender. In return, you agree to pay back the principal plus interest over a certain period of time. This is called “installment credit.” Often, personal loans are for specific expenses. For example, you might apply for a car loan to buy a vehicle, or a debt consolidation loan to reduce your debt. Personal loans can be secured with collateral or unsecured, and the amount you’re eligible to receive is tied to your credit history and financial picture.

    When you’re approved for a line of credit, the bank, firm or lender extends a certain amount and you can borrow on an as-needed basis. Whatever you pay back, you can access the credit again, just like with a credit card. This is called “revolving credit.” You can use the money for any purpose you wish. Just like with loans, lines of credit can be secured or unsecured. 

    Here are the key differences at-a-glance.

    Personal loan Line of credit
    Type of credit Installment (non-revolving) Revolving
    Payment schedule A fixed amount over a fixed time period. As-needed, with a minimum monthly payment if you borrow
    Interest rates Fixed or variable Usually variable, and tied to the Prime Rate (which is currently 6.45%.)
    Interest applicability On the whole loan Only on what you borrow
    Extra fees Transaction or service fees Transaction or service fees
    Uses A need specified when applying Any purpose, no need to reveal

    Pros and cons of a personal loan

    Here are the pros and cons for personal loans.

    Pros

    • Interest rates can be lower than with credit cards
    • The fixed payment schedule ensures your loan will be repaid by a certain date.

    Cons

    • Typically higher interest rates than the majority of lines of credit.
    • To use more credit you have to refinance the loan or get a separate loan.
    • Lenders may charge fees for administering the loan.
    • There might be limitations on what you can spend the money on. A car loan is only for the purchase of a vehicle, which may seem obvious, but other loans may only be used for renovations or debt consolidation. 

    Pros and cons of a line of credit 

    Here are the pros and cons for lines of credit.

    Pros

    • Typically have lower interest rates than personal loans.
    • Interest is only charged on the portion of credit used.
    • There is no fixed term so you can pay it off at any time without penalty (as long as you pay the minimum monthly amount).
    • The credit is “revolving”, meaning that once you pay it back you can borrow again without refinancing.
    • You can use the money for any purpose.

    Cons

    • Interest rates are variable, based on the prime rate, so the loan rate will fluctuate. For example, you might have a line of credit where the interest rate is prime + 1.5%. As the prime rate changes, so will the total interest on your line of credit.
    • Lenders often offer the maximum amount which can make it easy to overborrow. 
    • As there is no fixed payment schedule, you must manage repayment on your own. 
    • A secured line of credit against your home (like a HELOC) will require a one-time appraisal as well as legal fees. 

    How interest rates work for loans and lines of credit

    The interest you pay on a personal loan or a line of credit will depend on many factors including the lender, your credit history, the terms of the credit and the prime rate (in the case of variable interest). That said, these are the variables you can negotiate to get the best rates. 

    For a personal loan:

    • Interest rate
      Look for the lowest rate available to you, and decide whether you prefer a fixed or variable rate. 
    • Fixed or variable rate
      Loans most often incur a fixed rate, meaning that the interest is the same throughout the term of the loan. With a variable-rate loan, the interest rate will change in the same direction as the prime rate. 
    • Secured or unsecured
      You might negotiate a lower interest rate if you can secure the loan with collateral, such as a home. 
    • Amortization period
      Amortization is the amount of time you take to pay off the loan and can range from six months to 60 months (five years) for personal loans, reports the Financial Consumer Agency of Canada. Adjusting your amortization period might affect your interest rate.
    • Fees or penalties
      Loans come with fees. With personal loans, for example, you may pay a penalty if you pay it off early.

    For lines of credit:

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    Keph Senett

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  • Driving underwater: Is your car worth less than what you’re paying for it? – MoneySense

    Driving underwater: Is your car worth less than what you’re paying for it? – MoneySense

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    “We saw some rare (price) appreciation during the time that consumers were purchasing these high-priced cars,” Daniel Ross of Canadian Black Book said of the auto market during the pandemic years. 

    Global supply chain disruptions stemming from the pandemic left the auto market with low inventory—and coupled with high consumer demand—auto prices surged, Ross said. 

    Some of those issues have since begun to normalize, allowing prices to ease, but it’s left some consumers owing more on their auto loan than the car is now currently worth. It’s referred to as negative equity, or being underwater. 

    As with the vast majority of vehicles, they’re a depreciating asset, so for those who purchased their car when prices were high, their “vehicle will continue to lose lots of value because it was probably overpriced at that time,” Ross said. 

    Should you trade in your car for a cheaper one?

    On average, people who were underwater saw the negative equity in their cars climb to a record high of USD$6,255 in the second quarter this year, compared with USD$4,487 in the second quarter of 2022, a July report from auto retail platform Edmunds showed.

    Trade-ins with negative equity also jumped, Edmunds said in its report.

    “If you’re in a negative equity position, it’s not easy to get out of that,” Ross said. 

    For drivers who are in this situation, it’s better to drive that car into the ground and just keep paying off the loan, he said.

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    The Canadian Press

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  • Comparing buy now, pay later programs: Are installment plans a budget win or finance fail? – MoneySense

    Comparing buy now, pay later programs: Are installment plans a budget win or finance fail? – MoneySense

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    Some BNPL providers report your payment history to credit bureaus, which can positively affect your credit score if you make the payments on time. In addition, many BNPL providers only run a soft inquiry on your credit report to determine eligibility. That said, it’s possible that a credit check isn’t done at all. So, in this case, your credit report and credit score won’t be impacted by simply applying for BNPL. 

    There are some potential downsides. BNPL loans often require repayment within a short period, especially for smaller purchases, which might not contribute significantly to building your credit history. In that case, a credit card would be a better option. In addition, not all providers report to credit bureaus, which can create what deHaan calls “phantom debt.” When your credit score goes down, credit card companies can see this and won’t offer or approve you for another card, but that’s not the case with BNPL. This can cause consumers to take on more debt than they can handle. 

    DeHaan explained how it works: “So, I open a BNPL account with one provider, I max it out, I can’t pay it off. I go to the next one, I do the same thing… And before I know it, I’ve got three or four maxed-out credit lines, and the reason I can keep getting them is because there’s no reporting about each other’s maxed-out limits.” 

    Before signing up for any BNPL service, ensure you can comfortably repay your purchases in full. While BNPL can potentially boost your credit score through timely payments, it can also negatively impact your score if you miss any payments, leading to additional debt from late fees and interest charges.

    What’s in it for retailers?

    BNPL options benefit retailers in several ways. It can increase sales by allowing customers to spread out payments, encouraging them to spend more with larger purchases. In addition, BNPL providers typically handle the financial transactions and assume the risk of non-payment, so there’s no risk to the retailers themselves.

    What does a credit counsellor think about buy now, pay later?

    While the convenience of BNPL can be tempting, it’s important for consumers to read and understand the terms and conditions that come with installment plans. If you’re not careful, BNPL may deter you from achieving your financial goals. Like all loans, these plans aren’t without risks. Here are a few to know about.

    BNPL can lead to overspending

    For some, installment plans can encourage impulse spending. Deferred payments are an extremely popular option for many Canadians feeling the pinch of inflation and lifestyle creep. Being able to buy something that was previously unobtainable may tempt you to spend more than you can afford. 

    “When credit is cheap and easy, some might get themselves into trouble by spending beyond their means. With BNPL, many of the users tend to be the most vulnerable [financially], and they might not yet have a credit score,” deHaan said. 

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    Doris Asiedu

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  • Ellyce Fulmore is putting the personal back into personal finance – MoneySense

    Ellyce Fulmore is putting the personal back into personal finance – MoneySense

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    What was the biggest money lesson you learned as an adult? 

    The understanding of how big a role your identity plays in your finances. Finance is deeply personal and intersectional, and your money is directly impacted by aspects of your identity such as privilege, race, gender, sexual orientation, mental health, disability, systems of oppression and more. The identities you hold will impact how you view, understand, spend and approach your money. 

    I didn’t fully understand this until I came out as queer and was diagnosed with ADHD. These realizations helped me make sense of a lot of my money behaviours and challenges. For example, I struggled with impulse spending for years, and ended up with $15,000 of high-interest debt because of that. I felt so ashamed of this debt, but I didn’t know that having ADHD makes me four times more likely to impulse spend than someone without ADHD. By understanding who you are, the privilege you hold and/or barriers you face, your lived experience and your trauma, you can begin to change your relationship with money and create a financial plan that makes sense for your life.

    Learning this lesson is what inspired me to write a book and start my financial literacy company, Queerd Co., where our approach to financial literacy goes beyond the conventional, giving folks permission to be full human beings—not just numbers on a spreadsheet. At Queerd Co., our goal is financial equity, and every course we create, resource we recommend, space we hold and discussions we lead will aim to take a shame-free and identity-based approach to money.

    What’s the best money advice you’ve ever received?

    That your financial situation is not your fault, and the shame you feel around money is not solely your shame to carry. I learned this inside of the Trauma of Money certification program, where we spent time examining and unpacking the idea of shame and responsibility when it comes to our money. The reality is that many of us inherit money trauma and learn our financial behaviours and habits from our caregivers. We also have to consider the government policies, financial institutions, and larger societal systems such as capitalism, and how those play a role in the decisions we make and the financial challenges we are subjected to. In the Trauma of Money, we were taught to ask ourselves, “Whose shame is this?” to help call attention to the fact that some of the shame we feel has been placed upon us, despite it not being our shame to carry. This advice really helped me reframe the way I felt about my past financial decisions.

    What’s the worst money advice you’ve ever received?

    I tell this story in chapter 1 of my book, which is all about finding safe spaces: The first time I went to talk to a financial advisor at the bank, the advisor made a misogynistic comment along the lines of, “When you have a husband, he will take care of this for you.” This was his response when I tried to ask questions about some financial terms he had briefly mentioned. This was horrible advice because: a) it was misogynistic; and b) it was encouraging me to not be in control of my own financial situation. I cannot stress enough how important it is to have financial autonomy, even within a marriage. If you ever find yourself in an abusive relationship, having access to your own money will give you the freedom to leave.

    Would you rather receive a large sum of money all at once or a smaller amount regularly for life? 

    It would depend on the amount. If the smaller amount was enough to cover my monthly expenses, then I would choose that option, because it would give me the immense privilege of never again stressing about paying my bills. It would also take a lot of pressure off my business and allow me to explore more creative pursuits. But if the amount wasn’t enough to cover my bills, then I’d prefer the lump sum. I could actually make more money from the lump sum in the long term by investing it, but the first example would be a better decision emotionally. 

    What do you think is the most underrated financial advice?

    Gamify your finances. This is great advice for almost everyone, but especially for anyone who is neurodivergent. If you can make managing your money fun and enjoyable, you’ll be more likely to actually keep up with it, and have greater success with reaching your goals.

    What is the biggest misconception people have about growing money?

    That being “good with money” and building wealth is just a math game, and that all you need to do is manipulate the numbers—it’s so much more than that. Creating the perfect spreadsheet, debt repayment plan or investment strategy will never address the root of your money issues. We’ve been taught that if we follow the formulaic system for success, we will be wealthy and happy. But there’s no magic formula for success, because everyone’s lived experience, values, goals and definitions of wealth are different.

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  • What people often forget about personal finance – Growing Family

    What people often forget about personal finance – Growing Family

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    Collaborative post

    Personal finance is a hot topic, but it’s also one that a lot of people try to shy away from. The problem with this approach is that if you don’t know how to deal with your personal finances, then you’re never going to get yourself in a good position.

    In this article, we’re going to be taking a look at three things people often forget about personal finance, and how paying attention to them can help you stay in control.

    stacks of coins next to small wooden house

    You are in control

    First and foremost, you are in control of your finances. Sometimes your money just doesn’t stretch as far as you would like it to, but you have to prioritise going forward.

    Set yourself a budget if you have not done so already, and ensure that you are sticking to it. In this budget you need to include all of your bills, savings and anything else that needs to be paid, and then whatever is left is your money for little luxuries. 

    It can be hard to control your spending at times, but the benefits of doing so are well worth the effort.

    Prioritise clearing the debt

    Debts can easily get out of hand, so you should always aim to pay them off as soon as you can.

    Instead of ignoring the people that you owe money to, you need to set up a payment plan and go from there. Make sure that you’re keeping up with your payments, and you will clear your debt, even if it takes time.

    Options if you own your home

    If you own your home, then you may wish to carry out home improvements but don’t really have the money. Keep in mind that you may have equity in your property which could be released. A lot of homeowners forget about this, and feel as though they have to live in a home that isn’t working for them right now, even though there are other options.

    And there you have it: three key things that people often forget about personal finance. Staying on top of debts and establishing good money habits can seem like a daunting task, but by focusing on the right areas you can give yourself the best chance of staying in control of your finances.

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    Catherine

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  • Canadian consumer debt: How we’re paying for our credit cards – MoneySense

    Canadian consumer debt: How we’re paying for our credit cards – MoneySense

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    What is causing debt for Canadians?

    Matthew Fabian, director of financial services research at TransUnion Canada, said many household incomes are not keeping up with inflation and higher interest rates, leaving them to rely on credit.

    “Consumers that have had significant increases in their mortgage payment have made that deliberate trade-off to pay less on their credit card and in some cases, they’re missing their payment,” Fabian said in an interview. “We’ve seen a higher delinquency rate in credit cards for those consumers that have mortgages than traditional credit card consumers.”

    How much debt do Canadians have?

    Total consumer debt in Canada was $2.38 trillion in the first quarter, compared with $2.32 trillion in the same quarter last year, and down only slightly from a record $2.4 trillion in the fourth quarter. The report said 31.8 million Canadians had one or more credit products in the first quarter, up 3.75% year-over-year. The jump was mainly driven by newcomers and gen Z signing up for their first credit products. The report showed there was a 30% surge in outstanding credit card balances for the gen Z cohort compared with the previous year.

    “The younger generation (is) only getting access to credit for the very first time in their life,” said Fabian. “They’re still learning how to use it, they’re still learning what it means to pay your monthly obligations.”

    Meanwhile, millennials held the largest portion of debt in the country—about 38% of all debt—likely due to higher credit needs as they grow older, according to the report. “They’re in the life stage where they’re probably having children, getting houses and have auto loans,” Fabian said. “The structure of the debt is shifted where 10 years ago, the majority of them would have had credit cards and car loans.” (Read: “How much debt is normal in Canada? We break it down by age”)

    Are mortgages in Canada at risk for defaults

    Fabian said he isn’t overly concerned about households falling behind on their mortgage payments because of the strict screening process established by the banking watchdog to qualify for a mortgage. He also said cash-strapped consumers will typically pay their mortgage first at the expense of other credit products like their auto loan or credit card. 

    Even though there are concerns about missed payments among the vulnerable population, Fabian said, “We’re still seeing pretty decent resiliency in the Canadian consumer base, especially when you look at how quickly it’s grown with gen Z and the volume of credit participation.”

    He added interest rate cuts, which are anticipated as early as June, can lessen the burden on households over time. “Our expectation is that the market will start to correct back to normal,” Fabian said.

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  • Why young people keep getting caught in debt traps and how to break the cycle – MoneySense

    Why young people keep getting caught in debt traps and how to break the cycle – MoneySense

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    “They may see a slight increase in their income, and they think, ‘Oh, I just kind of hit the lottery, and now I’m going to spend like crazy,’” Schwartz said. “And it’s tough to change those behaviours after it’s been ingrained for a long period of time.”

    To prevent this from happening, track spending diligently—you can download apps for this purpose—and delay milestones such as moving out or getting a car if you can, Schwartz said. Build up an emergency fund in case you lose your income or suffer a financial setback, to avoid falling into serious debt.

    “If you have the opportunity when you’re young, when you’re not spending as much on rent, you’re not spending as much on food, if you can cut back on how much you’re socializing—that’s a great place to start to build up that reserve fund,” Schwartz said.

    Live within your monthly cash flow—using your debit card or cash—and develop a short-term austerity plan to make big strides on debt repayment, Terrio said.

    When to focus on debt repayment

    Summer months are tough for austerity because you want to socialize, he pointed out, but January through March are a good time to adhere to a severe budget. Up to 40% of your non-rent income should go to debt, Terrio said, noting short-term austerity is tolerable because it’s over quickly.

    Ultimately, the aim is to reach the tipping point when at least half of your debt payment is going to the principal—and the portion going to interest starts to slide. Never use an instalment loan, he added.

    “All these 36 to 48% interest loans that are $10,000—if you get one of those, you’re done,” Terrio said. “You’re never, ever getting out.”

    Once you’re free of debt, stay that way. Keep your credit limit low and turn down offers to increase it, Terrio said. If you move debt to a line of credit, stop using your credit card.

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    The Canadian Press

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  • “My take on debt has changed over time”: Eva Wong on saving and investing – MoneySense

    “My take on debt has changed over time”: Eva Wong on saving and investing – MoneySense

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    What was the biggest money lesson you learned as an adult? 

    The biggest money lesson I’ve learned as an adult, I learned at Borrowell and through our members. What I’ve learned from interviewing some of them is that a lot of people who struggle with money are actually very good at managing money, but they don’t have enough income. 

    I probably had prejudices before, thinking that people who struggle with money just aren’t managing their money well. But what I’ve found is that when you live on a very narrow margin, you actually have to be very good at managing your money. If you’re like me, making a salary that covers my expenses, I don’t have to be good at managing my grocery bill, or worry about my car breaking down, because I know I have enough money to pay for it. I don’t have to be that good with my money because I have an income that’s higher than my expenses.

    But for people who are living paycheque-to-paycheque, a lot of them are very good at managing their money because they have to be. It was good for me to learn that, because it can be easy to say that someone has a spending problem but, for a lot of people, they actually have an income problem, and it doesn’t mean that they’re not diligent with managing their money. That’s why it’s important to have good credit, so that people can access funds if there is an emergency, because they often don’t have savings to fall back on.

    What’s the best money advice you’ve ever received?

    To start from a young age the habit of saving at least 10% from your earned money. 

    What’s the worst money advice you’ve ever received?

    Having an emergency fund when you have outstanding debt, and if you have access to a line of credit, doesn’t make sense. So, the worst money advice is putting a significant amount of money into an emergency fund of cash that just sits there.

    If you have a line of credit you could draw from in case of emergency, I would use the [emergency fund] money to pay off debt. If you have debt, that’s a guaranteed interest cost, as opposed to just paying interest when you use your line of credit. Later, when you’ve paid your debt, you can start an emergency fund or invest your money. But pay off your debt first. 

    Would you rather receive a large sum of money all at once or a smaller amount regularly for life? 

    I’d rather receive a lump sum all at once. It gives you more flexibility to do something impactful and meaningful with it. I feel like having a smaller amount every week or month is more like a safety net and more of a safe answer. 

    What do you think is the most underrated financial tip?

    Paying off debts, especially the ones with high interest, like credit card debt, is underrated. A lot of people get caught up in thinking they have to contribute to an RRSP, or they have to save, or they need an emergency fund, but if you’re carrying a balance on a credit card and paying 20% interest, I think the better financial choice is to pay off debt. 

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  • What happens if I don’t pay my credit card bills?  – MoneySense

    What happens if I don’t pay my credit card bills?  – MoneySense

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    If you’re struggling to make your minimum credit card payments, you’re not alone. Unexpected emergencies can sometimes leave us short on funds to make the minimum payment on a credit card. According to Equifax Canada’s 2023 Market Pulse Consumer Credit Trends and Insights report, nearly 35% of Canadians carry balances on their credit cards from month to month. However, there are potential consequences for not paying your credit card bill on time. So here are the steps you can take to minimize the impact.

    Note that credit card companies may respond differently to missed payments, ranging from a tersely worded letter to potential legal action, depending on your issuer and your situation. In this article, we’ll explore the implications and ways to manage your credit card debt.

    What are the immediate consequences of not paying a credit card bill?

    If you don’t pay your minimum credit card balance, there could be different outcomes depending on the type of credit card you carry and the credit card issuer. Missing a couple payments will usually result in a hit to your credit score, as well as penalty fees like late charges and potentially a higher interest rate. If you miss more than one payment, the credit card company may also close your card. 

    Review your credit card agreement to ensure you are aware of your obligations and any potential penalties. If you miss payments, the credit card company may do any or all three of the following, according to the Canadian government:

    1. Revoke promotional interest rates.
    2. Increase interest rates in general.
    3. Cancel the credit card.

    Will my credit score be impacted if I don’t pay?

    Payment history is the biggest factor in calculating your credit score, so a late or missed payment can definitely impact it. Your credit score indicates creditworthiness for lenders, meaning it influences the loans you may qualify for, the interest rate you’ll pay, what you can buy on credit, and maybe even where you work and where you live. 

    Typically, one missed payment won’t end up on your credit report for at least 30 days after the payment due date. If you make the payment before that point, you might incur penalty fees, but your credit score likely won’t suffer. However, if you don’t pay your credit card for longer than that, your credit will take a hit and hinder your ability to qualify for certain financial services in the future.

    Interest increases and penalty fees on missed card payments

    Depending on the terms and conditions of your credit card, you may have to pay a late fee if you miss a payment. Penalty fees can depend on your balance and what’s outlined in the credit card agreement. 

    In addition, you might face a penalty annual percentage rate (APR) if you miss payments by at least 60 days, resulting in a higher interest rate being applied for a period of time. And that can grow your debt even higher. These terms differ depending on the credit card issuer. 

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    Randolph Taylor

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  • Couples and credit scores: How your partner’s credit can affect yours – MoneySense

    Couples and credit scores: How your partner’s credit can affect yours – MoneySense

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    Should I get a joint credit card with my partner?

    While your partner’s credit score won’t directly impact your credit score, joint accounts or adding the other as a co-applicant will. The one exception is adding your partner as an authorized user to your credit cards and banking accounts. 

    When added as an authorized user, your partner is able to use the credit card but cannot make any changes to the account. Their credit will also not be impacted in any way. However, when a partner is added as a co-applicant, they have to go through the required credit checks and both partners’ credit is impacted based on usage of the account.

    Joint accounts can be beneficial when both partners are on the same page with money. For example, a joint account can give you access to a larger borrowing limit. It also can simplify your finances and foster feelings of partnership. However, depending on your partner’s money habits, sharing a joint credit card could be a real risk to your money and your credit score.

    If either of you miss a payment on a joint account or run up a large balance, each of your credit scores can take a hit. On the other hand, if you and your partner always make your payments on time, both of you will see improvement in your credit scores as the joint account will show up on both of your credit reports. 

    Getting extra credit through a joint credit card might seem like a good idea, be sure to assess each of your financial situations before doing so as gaining new credit can influence financial behaviours. Be critical about how having more or less credit affects your ability to live within your means and pay off your debt in full each month. If you or your partner have any debt, the focus should be on paying it down. Only consider a new, joint credit card if you have paid off your individual debts first.

    How to maintain healthy credit history (and prevent debt) as a couple

    Before combining finances in any way, such as joint credit cards or loans, it is imperative that you and your partner are in agreement and have the same expectations. To maintain healthy credit and prevent debt, consider the following five things: 

    1. Make sure your partner is someone you can trust to properly budget by having open and transparent conversations about money. 
    2. Set boundaries on how the joint account or loan will be used, as well as spending limits. Some couples ensure they both agree on a purchase beforehand, whereas others may check in at the end of the month to ensure all spends are accounted for—it’s good for catching credit card fraud, too, since you never assume it was the other person.
    3. Agree on who will make payments to ensure they’re made on time.
    4. Decide the amount you each will contribute to shared expenses. Will it be 50/50 or a percentage based on your incomes?
    5. Discuss what happens if one of you can’t make a payment due to income loss or illness. What’s your backup plan?

    Money isn’t worth fighting about—but it’s worth talking about

    Discussions about finances aren’t always easy. They might cause stress, tension and arguments with your partner. But, the more you practice communicating with honesty and intention, it does become easier. 

    None of this is to say your partner having a sub-par credit score should be a deal breaker. In fact, it’s fairly simple to start rebuilding credit. As professionally certified credit counsellors with Credit Canada, we often help couples understand their credit and address debt. If you need additional support, contact us today to book a free credit-building counselling session.

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    Sandy Daykin

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  • What does opening or cancelling a credit card do to my credit score? – MoneySense

    What does opening or cancelling a credit card do to my credit score? – MoneySense

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    To close a credit card, the balance is $0. If there’s a substantial balance on the remaining cards, it’s going to increase the credit utilization ratio. And, if the increase is high enough, it will hurt your credit score. This is because the closed card’s unused credit limit no longer provides balance in the relationship between your other credit balances and credit limits. What you owe elsewhere can have a bigger impact than if you had a zero-balance credit card.

    Another thing: Closing an account means the creditor will stop reporting on your behalf your credit history on that card. If the card showed positive credit history, such as responsible usage and making payments on time, that history will gradually fade away and no longer bolster your credit score. 

    The reverse can’t be said. If the card showed negative credit history, closing the account will not erase the negative impact on your score. 

    Generally speaking, cancelling a credit card won’t improve your credit score, and you shouldn’t close a credit card unless you have a good reason, such as not trusting yourself to use the credit responsibly.

    Buyer beware: Welcome offers

    Many credit cards come with a generous sign-up bonus that helps you earn cash back, points, miles or a reduced interest rate. Welcome offers can be a great way to save money, especially if you already had planned on spending the minimum threshold to earn them. However, proceed with caution. 

    Read the fine print. Despite the enticing welcome offer of a credit card, your credit score may drop when you apply for a new card as a hard inquiry will be performed during the application process. Although your credit score will only drop a couple of points and will likely recover after a few months if you make your payments on time, it’s still a hit to your credit.

    Remember that welcome offers are one-time deals. While some credit card sign-up bonuses may save you money up front, the reality is that any rewards you earn aren’t worth incurring additional bills if you’re already struggling with debt. You should only consider a new welcome offer if you have paid off your credit card debt in full. If you have any debt, focus on paying that down—not short-term wins like getting a lower and very temporary interest rate.

    Opening and closing credit cards can impact how you use credit, too. Open multiple new cards, and you may end up with more credit than you can feasibly handle or keep track of. In addition, the allure of welcome offers may distract you from your financial goals. There’s impact on your credit score, and it’s critical to think about how having more or less credit affects your ability to live within your means and pay off your debt in full each month.

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    Doris Asiedu

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  • Money tips from Jordan Heath-Rawlings: “Make sure you can afford a sudden expense” – MoneySense

    Money tips from Jordan Heath-Rawlings: “Make sure you can afford a sudden expense” – MoneySense

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    Jordan Heath-Rawlings shares your frustration. In November 2023, he launched In This Economy?!, a podcast that helps Canadians tackle financial challenges. Described as “Your guide to understanding an unpredictable economy,” the show explores topics such as inflation, employment, debt, home ownership and repaying CERB.

    Heath-Rawlings, who lives in Toronto, is a long-time Canadian journalist—he was a newspaper reporter, a founding editor of Sportsnet, and director of special projects at Rogers Media, among other roles. In 2018, he started Frequency Podcast Network, along with Canada’s first daily news podcast, The Big Story, which he still hosts (he also oversees 30-plus other shows). Below, Heath-Rawlings shares what he thinks about credit, debt, real estate and more—plus why he’s now a “huge points guy.”

    Check out In This Economy?!, available on these podcast players. New episodes are released on Thursdays.

    Who are your finance heroes?

    So, In This Economy?! is designed to come from a curious person, not someone who has studied the financial industry extensively and has formed opinions about it. I don’t really have a finance hero. Except, I’ll say this: My career as a sports journalist, including a lot of time writing about fantasy sports and gambling, has made me keenly aware of the concept of the “mass market miss”—a player or investment that doesn’t seem to match stereotypical norms, so it’s overlooked compared to others, creating easy value for those willing to value results over aesthetics. So, can I say, like, baseball writer Bill James or baseball executive Billy Beane?

    How do you like to spend your free time?

    I’m a homebody for the most part, so hanging around the house, watching sports, being with family. My partner is a travel junkie, though, so we try to find the time—and money—to take a few trips a year.

    If money were no object, what would you be doing right now?

    Golfing—somewhere warm. With my wife and daughter on the beach waiting for me to meet them afterwards. We’ll be doing this in a few weeks from now, and I’m already dreaming about it.

    What was your first memory about money?

    My first money memory—besides making like 25 cents per row weeding the garden for my grandfather—is my parents wisely not spending $200 to buy me Air Jordans that I would have wrecked in two weeks anyway. I grew up in the burgeoning sneaker era, when they were just becoming big-time status symbols, and I wanted what the cool kids had.

    What’s the first thing you remember buying with your own money?

    Oh, baseball cards. It is absolutely 100% baseball cards. And I still have them in a box in our basement. Sadly, I came of age during the absolute peak popularity for kids collecting cards, so they aren’t worth anything, save for the memories. But in 1988, I—and every other kid I knew—would have told you they’d have made me rich by now.

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    MoneySense Editors

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