Best Low Interest Credit Cards in Canada 

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What is a Low Interest Credit Card?

A low interest credit card is one with an interest rate of around 10% to 15%. These interest rates are well below the average credit card interest rate in Canada.

If you intend to carry a balance on your credit card, finding the lowest interest credit card in Canada should be a priority. In this case, choosing a low interest credit card over a cash back credit card is recommended. This is because a cash back credit card often won’t offer enough cash back rewards to outweigh the amount of interest you’ll be paying. 

Determining the Best Low Interest Credit Cards

There are many low interest credit cards to choose from in Canada. When selecting the best credit card for you, interest rate is not the only thing to take into account. 

Some important components to consider include:

  • Eligibility
  • Reviews
  • Interest Rates
  • Benefits and Rewards
  • Annual Fees

Eligibility

It’s important to consider the requirements for a certain credit card before you apply. To have the best chances of being approved, ensure you meet the necessary prerequisites. 

The following are requirements you might come across when applying for a low interest credit card Canada:

  • Minimum income
  • Minimum age
  • Positive credit score
  • Social insurance number, and more

Reviews

Thanks to the Internet, consumers can now take advice from one another. This is often more helpful than relying only on information provided by a credit card issuer. 

Reading reliable reviews, such as this one, can give you insight into the pros and cons of each credit card. By learning from others, you can guarantee you get the lowest interest credit card Canada that is best for you. 

Interest Rates

A single credit card will have multiple interest rates. Interest rates differ depending on the type of transaction. For example, interest rates on purchases are typically lower than interest rates on cash advances. Therefore, it’s important to compare the interest rates on different credit card charges. 

In Canada, different rates are placed on the following transactions:

  • Purchases
  • Cash Advances
  • Balance Transfers

Be mindful of how you’ll be using your credit card. This will help you determine which interest rates you need to consider most and which won’t affect you. 

Benefits and Rewards

Many low interest credit cards also offer certain benefits and rewards. Consider which cards come with additional perks when deciding which low interest credit card is best for you. 

Added benefits may include:

  • Cash back
  • Travel perks
  • Rewards (i.e. Aeroplan or Air Miles)
  • Low or no foreign transaction fees, and more

Keep in mind that credit card benefits don’t usually outweigh a low interest rate. So, if you carry a balance on your credit card, make it a priority to choose a card with the lowest interest rate. If you find a low interest credit card that also offers benefits, great!

Annual Fees

Comparing annual fees is also important when choosing the best low interest credit card. Having to pay an annual fee leaves you with less money to put towards your balance owing. Therefore, look for a credit card with low or no annual fees. 

Important Terminology

When choosing a low interest credit card in Canada, it’s helpful to know a few important terms.

Here’s a breakdown of some of the most common terms used by credit card issuers:

  • APR
  • Fixed Rate
  • Variable Rate
  • Minimum Payments
  • Payment Deferral
  • Balance Transfers

APR

APR stands for annual percentage rate. Most credit cards in Canada list interest rates as an APR (i.e. an annual rate). However, the rate is calculated per day and charged per month. 

It’s easy enough to calculate your interest charges per day based on your APR. To determine your daily interest, multiple your amount owing by the APR then divide that number by 365.

Example:

  • You owe $500 on your low interest credit card 
  • Your APR is 19.99%

To find your daily interest:

  1. Multiply $500 by 19.99% (i.e. 0.1999) = $99.95 
  2. Divide $99.95 by 365 days = $0.27 per day 

If you carry a balance of $500, you will owe $0.27 per day in interest.

Keep in mind that interest compounds daily. Therefore, without any additional purchases, the next day you’ll have to pay interest on $500.27 (i.e. your $500 balance plus the $0.27 in interest that you owe).

Fixed Rate 

A fixed rate, or fixed APR, credit card means that the interest rate on purchases doesn’t change. Therefore, if you have a fixed rate credit card that has an interest rate of 21.99% this is the amount of interest you will always pay on purchases. Your interest rate won’t increase or decrease from year to year. 

Variable Rate

A variable interest, or variable APR, credit card may have increases or decreases in its interest rates over time. 

A variable interest rate will rise and fall depending on changes in the economy. This is because variable interest rates are tied to the index rate. More specifically, variable rates are set at a certain percentage above the index rate. Since the index rate is volatile so are variable interest rates.

The difference between the variable interest rate and the index rate is called the margin. For example, if the margin is 16.99% and the index rate is 3%, the variable rate will be 19.99% (i.e. 16.99% + 3%). 

Minimum Payments

A minimum payment is the amount that you must pay on your credit card each month. Most commonly, minimum payments are 3% of your credit card balance or $10, whichever is greater.

Not paying the minimum payment has consequences. For example, if you don’t pay two or more minimum payments within a year, your interest rates can increase. As well, not making minimum payments can hurt your credit score. 

Keep in mind, paying the minimum payment dodges late fees but doesn’t stop interest from accruing. Even after paying the minimum payment, you will still have to pay interest on any remaining balance. 

Payment Deferral

Payment deferrals are a short-term solution for those who are unable to make minimum payments. 

Credit card issuers will often allow you to defer payment for at least one month. Sometimes this will also include a reduction in your interest rate. However, the interest rates will return to normal after the deferral period.

Balance Transfers 

A balance transfer involves moving debt from one credit card to another. This can help you save money by moving from a high interest rate credit card to a low interest rate credit card.

Balance transfer offers will often provide a grace period. This can include up to 18 months interest-free. During this time, however, you will still need to make minimum payments. Missing a minimum payment during this time can result in an increase in APR and various other fees. 

Keep in mind the minimum payment is usually around 3% of your total balance. For example, if you have a balance of $5,000, the minimum payment will be $150. 

Credit card transfers may be associated with other fees and conditions. Always remember to read the fine print to cover all your bases. 

High Interest vs Low Interest Credit Cards in Canada

Let’s look at a comparison of a high interest credit card and a low interest credit card in Canada. This will help you determine how much of a difference using a low interest credit card can make. 

High Interest Credit Card - 21.99% APR with a $1,000 balance owing 

  • $1,000 x 21.99% (0.2199) = $219.90 (annual interest)
  • $219.90 / 365 = $0.60 (daily interest)
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Low Interest Credit Card - 8.99% with a $1,000 balance owing

  • $1,000 x 8.99% (0.0899) = $89.90 (annual interest)
  • $89.90 / 365 = $0.25 (daily interest)
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Based on the examples above, you can see that a low interest credit card will save you approximately $130 per year in interest.

Tips and Tricks to Reduce Credit Card Interest

To avoid paying high amounts of interest, try these tips and tricks:

  • Use the lowest interest credit card in Canada
  • Pay more than the minimum payment 
  • Don’t misuse your credit card
  • Use direct deposit for credit card payments
  • Consider balance transfer offers
  • Implement strategies to pay off credit card debt as quickly as possible

When to Choose a Low Interest Credit Card

A low interest credit card may be the right option for you if you:

  • Intend to carry a balance on your credit card
  • Are planning on making a large purchase and know you’ll need time to pay it off

Most importantly, choose a card that works best for you. Consider how you intend to use your credit card and what perks and benefits will be most beneficial to you. 

FAQs

What credit card in Canada has the lowest interest rate?

There are several great low interest credit cards in Canada. To determine which is right for you, read reviews, such as this one, and research the different options. When choosing a card, look at eligibility requirements, annual fees, interest rates, etc. 

How can I get a credit card with low interest?

To get a credit card with low interest, find a card with an APR of around 10% to 15%. Once you decide which low interest credit card will work best for you, ensure that you meet all eligibility requirements. Finally, apply for the card through the credit card issuer. 

What is a good credit card interest rate in Canada?

Low interest credit card rates fall anywhere between 10% and 15%. However, in Canada, you may be able to find annual interest rates as low as 8.99%.

Emma Tremblay

Emma is responsible for all content on Creditcards360.ca. She has a college degree in economics and a keen interest in personal finance. Get in touch with her by email.

Last updated Mar 8, 2021
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