You're carrying a balance on a credit card and a balance on a line of credit. Money's tight this month. You can throw an extra $200 at one of them. Which one?
It feels like a wash. Both are revolving credit — you borrow, you carry a balance, you pay interest, the limit resets as you pay it down. Mechanically they're twins. But the interest rate on one is usually more than double the other, and that gap decides everything. Put the $200 in the wrong place and you're paying to stand still.
Here's how to think about it, with real Canadian numbers.
The rate gap is the whole story
Revolving credit in Canada splits into two very different price tiers.
Credit cards carry the highest rates in the mainstream lending world. The average purchase rate sits around 20.50%, according to Bank of Canada data, and most standard cards land between 19.99% and 23.99%. Retail and store cards can climb toward 29.99%.
Lines of credit are priced off the prime rate. As of mid-2026, prime is roughly 4.45% to 4.95%. An unsecured personal line of credit typically runs prime plus 2% to 7%, depending on your credit profile — so call it somewhere in the 7% to 11% range, often landing near 8%. A secured line, like a HELOC, sits even lower, closer to prime plus 0.5% to 1%.
So the practical comparison for most people is ≈20% on the card versus ≈8% on the line of credit. Same mechanics, wildly different price.
That gap is not a rounding difference. It's the difference between debt that grows fast and debt that barely moves.
Attack the highest rate first
The rule is boring and it's correct: when the money is limited, put every extra dollar against the highest-rate balance, and pay only the minimum on the rest.
This is sometimes called the avalanche approach. It's not a personality quiz or a motivation trick — it's just arithmetic. A dollar of interest costs the same whether it comes from a card or a line of credit. So you want to kill the dollars that generate the most interest per year. At 20%, every $1,000 of card balance costs you about $200 a year in interest. At 8%, every $1,000 of line-of-credit balance costs about $80. Same $1,000 owed, $120/year difference in what it costs to carry.
Let's make it concrete.
A real example
Say you're carrying:
- $5,000 on a credit card at 20%
- $5,000 on a line of credit at 8%
You've got $300 a month to put toward debt above the minimums. Where does it go?
Carrying that card balance at 20% costs about $83 a month in interest ($5,000 × 20% ÷ 12). The same balance on the line of credit at 8% costs about $33 a month ($5,000 × 8% ÷ 12).
Send the $300 at the card first. Every month that card balance shrinks, you claw back a chunk of that $83. Once the card is clear, you roll the whole payment onto the line of credit — which is now the only balance left and the cheaper one.
Flip it — pay the line of credit first — and you leave the 20% card sitting there generating $83 a month while you chip away at the debt that was only costing you $33. You'd pay hundreds of dollars more in interest to end up debt-free at the same time, or later. The order is free to get right. Getting it wrong has a price tag.
The one honest exception: if a balance is small enough that clearing it frees up real monthly breathing room — knocking out a $400 card to erase a payment entirely — that's a legitimate reason to go out of order. Just know you're trading a bit of interest for cashflow relief, and decide that on purpose.
The interest-only trap on a line of credit
Here's the part that catches people, and it's specific to lines of credit.
A credit card forces a minimum payment — usually a small percentage of the balance, or a flat floor. It's a terrible way to pay off debt (more on that below), but it does chip at the principal. In Canada, your statement is even required to print a box showing how long payoff takes at the minimum.
A line of credit often only requires you to pay the interest each month. That's it. Pay the interest, stay in good standing, borrow again up to your limit. It feels manageable — the payment is small and the account never looks like it's in trouble.
But an interest-only payment never touches the debt. Pay $33 in interest on that $5,000 line of credit, and next month you still owe $5,000. Do it for a year and you've paid roughly $400 for the privilege of owing the exact same amount you started with. The balance is frozen in place, quietly bleeding money, while it looks like you're keeping up.
This is the trap: a line of credit can sit at the same balance for years because the required payment was designed to keep it there. If you're only ever paying the interest, you're renting the debt, not repaying it.
While you're at it: the card minimum is its own trap
Credit-card minimums are the same problem wearing a different hat. They're set low — often around 2% to 3% of the balance — so the vast majority of your payment goes to interest, not principal.
Run the numbers on a $5,000 card balance at roughly 20%, paying only the minimum: it takes about 21 years to clear, and you pay close to $6,000 in interest — more than the original balance. Add just $100/month on top of the minimum and that collapses to a few years and a few thousand dollars saved. Same debt, radically different outcome, entirely down to paying more than the floor.
So the full picture is: minimums keep card debt alive for decades, and interest-only payments keep line-of-credit debt alive indefinitely. Both are designed to be comfortable, and comfortable is expensive.
What this looks like in practice
You don't need a spreadsheet. You need three things in front of you at once:
- The rate on each balance. The highest one gets your extra dollars.
- The minimum on each, so you keep everything in good standing while you concentrate fire.
- The real payment, not the minimum, on whatever you're attacking — enough to actually shrink the principal, not just service the interest.
The hard part isn't the math. It's seeing all of it in one place — the card, the line of credit, what each one actually costs this month, and whether the payment you're making is denting the balance or just holding it steady. When those numbers live in separate banking apps and half-remembered statements, the interest-only trap is easy to walk into without noticing.
That visibility is the whole reason we're building Viktoria — a forward-looking cashflow app made for Canadians juggling cards and lines of credit, so you can see what's coming and where your next dollar does the most good, before the bill hits.