What New Year’s credit deals promise—and why you should be wary

January is for fresh starts, but too many Canadians are held back by last year’s overspending. Lenders know about new year’s debt-hangovers, so you may be seeing more credit offers in your inbox—but be wary. Used incorrectly, that deal on a balance transfer or sign-up bonus could get you into even deeper financial trouble.

Credit card debt in Canada

If your last credit card statement dampened your seasonal joy, you’re not alone. According to TransUnion, consumer credit card debt rose 1.95% year over year in 2025, with even bigger jumps for mortgages, lines of credit, and auto loans. Wealthsimple reports that Canadians hold an average of $4787 in credit card debt, which can take time to pay off. And all the while credit card interest accumulates.

Mark Kalinowski, a Financial Educator at the Credit Counselling Society, points to compound interest, or “the interest paid on the interest.” When you pay only the minimum amount due or less than the full balance, interest accumulates. You have to pay interest on that amount as well. “This can create a debt trap where cash flow is used to pay debt for long periods of time,” he warns. “Even small amounts borrowed can take decades to pay off.”

“New Year’s” deals to watch out for

Here are some common promotions that might cause more trouble than they’re worth. 

Balance transfer

A balance transfer is when you move debt from one credit account to another, usually with lower interest. There’s typically a balance transfer fee, usually 3–5%, so if you move $10,000 with a balance transfer fee of 3%, you’d pay $300. Promotional offers usually include a low interest rate for a limited time, and will sometimes forego the balance transfer fee.

Read the fine print

Moving debt from a high-interest card to one that charges less can be a great strategy when done right. Look for a 0% balance transfer fee, and ensure that the promo period is long enough to pay off your debt. Also, find out what happens if you miss a payment to avoid costly problems. 

Imagine you transfer $15,000 in debt to a card with a 19% regular interest rate and a 0% interest promotional period for six months. To see how a balance transfer promotion could actually hurt your bottom line, Malinowski picks up the story: “They plan to pay $2,500 per month to pay it off in time but after making the first two payments, they miss one.” This can trigger a $50 late fee and cancel the promotional rate, he says. Now, you have a balance of $12,050 on a card charging 19%, which comes out to about $190 in interest per month. “It will take five more months to pay off the debt, and the total extra cost from interest and fees will be roughly $1,000,” he says.

Sign-up bonus

Sign-up bonuses promise a reward when you get a new credit card. Common rewards are boosted cash-back rates or credit card points, but sometimes there are other perks like a first-year annual fee waiver.

Read the fine print

A sign-up bonus can be a valuable perk, but it’s a poor strategy for paying down debt. Bonuses are usually temporary (like a high cash back rate) or one-time (like an annual fee waiver or gift of rewards points). Not all cards let you apply points to your credit balance, and even if they do, the value won’t likely be enough to clear your debt. 

You can always earn more by spending on the card, but that defeats your goal of debt reduction. Also be aware that every time you open a new credit account, it impacts your credit score. 

What to do if a credit offer did not work out

If you accepted a credit offer and it’s not helping you pay down your debt, there are a few things you can do.

• Take action. Don’t be paralyzed by financial stress. Review your finances immediately (with a credit counsellor, if you wish) and make a plan.
• Consider lower-interest credit cards. Credit card interest rates can be as high as 25%. Trim compound interest by moving your debt to a low-interest credit card.  
• Consider consolidation. Combine your debt into one loan with a manageable payment, preferably at a lower interest rate. If you go this route, ensure that you also adjust your credit card usage going forward.

How to tackle debt without using more credit

“Getting new credit products without closing old ones can lead to increased debt loads over time,” Malinowski says, adding that you need to understand the source of your debt to work towards a solution. He recommends making a budget, cutting expenses, and putting any extra towards your debt. Increasing your income through a second job or side hustle can accelerate your progress. 

As tempting as a quick fix may seem, taking on more credit isn’t the pathway to real financial relief. You can’t borrow your way out of last year’s mistakes. By slowing down, reading the fine print, and focusing on a clear repayment plan, you can turn January into a true reset—not just another cycle of debt.

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