# Paying off your credit card

From: Financial Consumer Agency of Canada

## Make your payments on time

You can choose to pay your balance in different ways including:

• online
• by telephone
• at an ATM
• in person at a branch
• by pre-authorized debit
• by mail with a cheque

The payment method you choose can affect how quickly it's processed and the date it's considered paid. The time it takes to process your payment will vary depending on your financial institution and the payment method you choose. Make sure you know when your payment will be processed to avoid making a late payment.

Credit card payments are processed during business days from Monday to Friday. If a payment is due on a weekend or a holiday, you can make your payment the following business day. This will count as being paid on time.

Contact your credit card issuer to find out how long it takes to process different payment methods.

## Make at least the minimum payment

Make at least the minimum payment if you can’t pay off your balance in full. The minimum payment is the minimum amount you have to pay each month on your credit card balance.

You minimum payment will be either:

• a flat dollar amount, usually \$10, plus any interest and fees
• the higher of a dollar amount, typically \$10, or a percentage of your outstanding balance, typically 3%

Your credit agreement will tell you which method your credit card issuer will use to calculate your minimum payment.

Paying only the minimum amount you owe means:

• it will take you longer to pay off your credit card balance
• you'll pay more interest

Increasing your monthly payment by even a small amount will shorten the time it will take you to pay off your balance by a lot.

Table 1: Compare the cost and time to pay off your credit card when you make only the minimum payment and when you increase your monthly payment
Payment scenarios Starting balance Payment amount Interest rate Time required to pay off balance Interest paid Total amount paid
Scenario 1: You pay only the minimum each month \$2,000 \$60 18% 13 years, 10 months \$1,799 \$3,799
Scenario 2: You pay the minimum plus an additional \$100 each month \$2,000 \$160 18% 1 year, 6 months \$264 \$2,264

Use the Credit Card Payment Calculator to compare your payment options.

Credit card statements, from a credit card issuer that is a federally regulated financial institution, must include how long it would take you to pay off your balance in full by only paying the minimum amount you owe.

## Payment holidays

Your credit card issuer may offer you a payment holiday. This means they will let you skip a payment. However, you'll still pay interest.

If your credit card issuer is a federally regulated financial institution, it must clearly tell you whether you'll pay interest if you skip a payment. This information must come with the payment holiday offer.

## How payments are applied to your balance

If you don’t pay your entire credit card balance by the due date, you’ll pay interest.

Different interest rates may apply to different types of credit card transactions. For example, cash advances often have a higher interest rate than purchases. This means different interest rates will apply to your balance depending on how you use your credit card.

Typically, your minimum payment will apply it to the portion of your balance with the lowest interest rate. Any amount you pay over the minimum payment applies in one the following two ways:

• to the portion of the balance with the highest interest rate
• proportionally to the entire balance

A credit card issuer that is a federally regulated financial institution can decide how it will apply your minimum payment to your balance.

## Missing or making late payments

If you don’t pay at least the minimum payment or you make a late payment, you risk:

• negatively affecting your credit score
• losing the benefit of any promotional rate offer you have

Federally regulated financial institutions are required to have a process in place to help resolve disputes between consumers and their financial institutions.

Use the complaint-handling process search tool to find who to contact if you have a problem with your financial institution.