In this guide
What happens if you miss one credit card payment?
One missed payment is fairly minor compared to multiple missed payments, but three things can happen. Depending on your card agreement, that first missed month usually means a higher interest rate, a small hit to your credit, and a bigger payment the next month.
Late fees and interest: You might be charged a late fee and could lose your grace period, causing interest to accrue.
Credit report: A single late payment on its own won’t ruin your credit. But once you’re 30 or more days past due, your card issuer reports the missed payment to Equifax and TransUnion, and that mark stays on your credit report for six years. If you pay it within the first 30 days, you can avoid any damage.
Larger payment: Your minimum payment increases, with one month turning into two. Next month, you owe the payment you missed, the new one, plus interest on both.
They’ll call you, often every day. You’ll get texts and letters too.
Source: Financial Consumer Agency of Canada – How long information stays on your credit report
What happens after a few months of missed credit card payments?
If you miss multiple credit card payments, it gets serious. Your card gets frozen so you can’t spend on it, reminder letters and phone calls continue, and the full balance often becomes due at once instead of in monthly instalments.
By around six months of non-payment, most lenders charge off the debt. That doesn’t mean it’s forgiven. The account gets sold or assigned to a collection agency, and from then on, you’re dealing with a debt collector instead of your credit card issuer.
Here’s how the sequence of events unfolds after you stop making credit card payments.
| Time since you stopped paying | What usually happens |
|---|---|
| Right away | Interest starts on your full balance, you lose the grace period, and a late fee is added |
| About 1 month | The missed payment is reported to Equifax and TransUnion, and your minimum payment climbs |
| 2 to 3 months | Your card is frozen, reminder letters turn into phone calls, and a penalty interest rate is often added |
| After several months | The debt is charged off and passed to a collection agency |
| Several months and beyond | A creditor can sue. If they win, they can garnish your wages or freeze your account |
Source: Financial Consumer Agency of Canada – Dealing with a debt collector
Can your bank take money from your account to pay a credit card?
Most people don’t know about this one. If your credit card is with the same bank that holds your chequing or savings account, the bank can take money out of your account to cover an overdue credit card balance. It’s called the right of set-off (or right of offset).
The bank doesn’t have to warn you, ask your permission, or get a court order first. Set-off applies to credit cards, lines of credit, loans, and overdrafts held at that institution.
If you’re falling behind on a credit card with your bank, move your money out before the bank takes it. A bank can only take money from accounts held with it. So some people open an account at a bank they owe nothing to and get their paycheque sent there instead.
Source: Financial Consumer Agency of Canada – When a financial institution can take money from your account
Can you be sued for unpaid credit card debt?
If you stop paying entirely, a creditor or collection agency can take you to court. To win, they have to sue within the statute of limitations period, which is the legal deadline for court action.
In Ontario, Alberta and British Columbia, the deadline is two years from your last payment or written acknowledgment of the debt. Quebec sets it at three years, and some provinces and territories set it at six years.
Be careful here. Making a payment or admitting in writing that you owe the debt resets the statute of limitations period and gives them more time to sue. A debt collector who knows the debt is close to expiring might push for you to make a token payment for exactly that reason.
If a creditor sues and wins, they get a court judgment. With that judgment, they can garnish your wages or freeze your bank account until the debt is paid.
Sources: CollectionAgencies.ca – What Is the Statute of Limitations on Debt in Canada? and Government of Alberta – Creditors, Collection Agencies and Debt Repayment
Being sued isn’t automatic or instant. But ignore the court papers, and a manageable debt turns into a wage garnishment.
How do you deal with credit card debt you can’t pay?
There’s more than one way to get out of credit card debt, and the right one depends on your situation. Most people who fall behind on a credit card don’t need insolvency. Start by matching your problem to the solution that fits it, nothing heavier.
If the problem is temporary, a job gap or just a bad month, call your card issuer. Many will lower your rate, waive a fee, or set up a short term hardship plan if you ask before you default.
When does consolidating credit card debt make sense?
Debt consolidation works when you can afford what you owe, and your credit score is still good.
At around 20 percent, most of the monthly payment goes to interest, and the balance barely moves. A low-interest line of credit or consolidation loan rolls several credit cards into one payment at a lower rate, so more of each payment clears the actual balance.
It’s the same amount of debt, but you pay less to clear the balance, and you can pay off the credit card faster.
Homeowners get the lowest rate by borrowing against the house, but that puts their home on the line for debt that was never secured before, so this requires careful consideration.
Steer clear of any consolidation loan aimed at people with poor credit. The rate can often be the same as your credit card or higher, so you save nothing.
Is a debt management plan the right solution to credit card debt?
A debt management plan through a non-profit credit counsellor fits when you can repay the full amount, but need the interest reduced or eliminated and one payment instead of five.
It isn’t a loan, and it doesn’t require good credit. You repay 100 percent of what you owe, usually over three to five years. You typically pay fees to the credit counselling agency for administering the plan.
A debt management plan is an informal arrangement. It’s flexible, but it also means your creditors aren’t legally required to accept it, and you have no legal protection from creditor action. It can’t stop a lawsuit or a garnishment that’s already moving, and it cannot include any government debts like taxes or student loans.
When is a consumer proposal or bankruptcy genuinely right?
Insolvency is the right way forward in specific circumstances. If you owe more than you can realistically repay within five years, your debt is spread across multiple creditors, or collection action has started, and you need it legally stopped, a consumer proposal or bankruptcy is a sensible route.
A consumer proposal cuts the total you repay, freezes interest and legally binds every unsecured creditor so they cannot take legal action against you. Unlike a debt management plan, it can include government debts like taxes and student loans.
Bankruptcy is the last resort, for when even a reduced amount isn’t affordable. You give up any non-exempt assets, and once you’re discharged, most unsecured debts are gone.
Both are filed through a Licensed Insolvency Trustee, and both trigger a stay of proceedings, which stops collection calls, lawsuits and wage garnishments.
Credit card debt is the most common debt in Canadian insolvencies. In 2024, 89 percent of people who filed a consumer proposal or bankruptcy owed credit card debt, with a typical balance of $13,359.
Source: Office of the Superintendent of Bankruptcy Canada – Canadian Consumer Debtor Profile 2024
Which option fits your situation?
| Your situation | Sensible route | What you repay |
|---|---|---|
| One rough month, income is fine | Hardship plan with your card issuer | Everything, on adjusted terms |
| Several cards, decent credit, income covers the debt | Low-interest line of credit or consolidation loan | Everything, at a lower rate |
| Can repay in full but the interest is drowning you | Debt management plan through a non-profit credit counsellor | 100 percent, interest reduced or stopped |
| Can’t repay in full within five years, multiple creditors, or facing garnishment | Consumer proposal through a Licensed Insolvency Trustee | A negotiated portion, legally binding |
| Can’t afford even a reduced amount | Bankruptcy through a Licensed Insolvency Trustee | Based on your income and assets |
Whatever you choose, act as early as possible. Every option gets harder the longer you leave it.
Frequently asked questions
What happens to unpaid credit card debt in Canada?
It moves through predictable stages. Interest and fees build, the missed payment is recorded on your credit report a month later, and at around the six month mark, the account is charged off and passed to a collection agency. From there, a creditor can sue, win a court judgment, and garnish your wages, unless you clear the debt or settle it through a consumer proposal or bankruptcy.
How long before unpaid credit card debt goes to collections?
Most issuers charge off the account and hand it to a collection agency after about six months of non-payment. Before that, you’ll get letters and calls, and your card gets frozen. The exact timing depends on your credit card issuer.
Can you go to jail for not paying a credit card in Canada?
No. Unpaid credit card debt is a civil matter, not a criminal one. A creditor can sue you and, if they win, garnish your wages or freeze your account, but you can’t be arrested or jailed simply for owing a debt.
Does unpaid credit card debt ever disappear on its own?
No. After the limitation period passes, two years in most provinces and three in Quebec, a creditor loses the right to sue you successfully, but you still legally owe the money, and debt collectors can still call. The debt disappears only if you pay, settle it, or discharge it through a consumer proposal or bankruptcy.
Will one missed credit card payment hurt your credit score?
A single missed payment won’t destroy your credit, especially if you catch up fast. But once you’re about a month behind, the missed payment is reported to Equifax and TransUnion and stays on your report for six years. Repeated late payments do real damage.
Can a credit card company take money from your bank account?
Yes, if the card and the account are at the same institution. Under the right of set-off, a bank can take money from your chequing or savings account to cover an overdue card, with no notice and no court order. A separate collection agency needs a court judgment first.
What happens to your credit card debt if you just ignore it?
It grows. Interest keeps adding up, your credit score drops, the account goes to collections, and the creditor can sue for a judgment that leads to garnishment or a frozen account.
Is it better to settle a credit card debt or file a consumer proposal?
It depends on how much you owe and what you can afford. Settling works if you have a lump sum and only one or two debts. A consumer proposal, filed through a Licensed Insolvency Trustee, is usually the better fit when the total is large or spread across several creditors, since it covers everything in one legal agreement and stops collection action.
Talk to a Licensed Insolvency Trustee
If you’ve stopped paying your credit cards, or you’re about to because you can’t afford them, get free advice. A Licensed Insolvency Trustee can lay out all the options available and help you choose the right one. The first consultation is free.
