11 Best Low-Interest Credit Cards in Canada for 2024
Jul 3, 2024A low-interest credit card can help keep your credit card balance from growing quickly — making it easier to pay off and save money.
If you want to slow down your debt accumulation and rewards aren’t a top priority, a low-interest credit card can be a good place to start.
To help you find the one that’s right for you, NerdWallet has compiled the best low-interest credit cards in Canada.
Best low-interest cards with rewards
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Card detailsBest low-interest secured card
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Card detailsBest low-interest cards with no annual fees
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Card detailsBest low-interest business cards
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Card detailsMethodology
BACK TO TOPNerdWallet Canada selects the best low-interest credit cards based on their overall consumer value. Our evaluation methodology is weighted by factors: 20% average earn value, 20% intro offer, and 60% fees and interest.
Other noteworthy features, such as insurance, special perks and extra benefits, earn unofficial bonus points. Only cards without a standard or promo low-interest rates were considered.
Average earn value considers earning rates, rewards structure and spending categories.
The intro offer considers the welcome bonus value, promotional interest rates, and any waived fees.
Fees and interest consider interest rates for purchases, balance transfers and cash advances, and additional costs such as foreign transaction fees.
How low-interest credit cards work in Canada
What is a low-interest credit card?
A low-interest credit card is similar to a traditional credit card, but it carries an interest rate lower than that of a typical card. If you often carry a balance on your credit card, you may find that your interest charges are adding up — and your balance keeps growing. Finding a card with the lowest possible interest rate is one way to help keep your credit card debt manageable.
Low-interest credit card features
A common feature is that low-interest cards tend to come with lower annual fees than cards that offer more benefits. Some low-interest cards even charge no annual fee.
Generally, lower-interest credit cards come with a tradeoff: most don’t offer many perks, such as rewards points or travel insurance.
How to get a low-interest credit card
Qualifying for a low-interest credit card is similar to applying for any other credit card. Typically, you must:
Be the age of majority in your province or territory.
Be a Canadian resident.
Meet any minimum annual income and credit score requirements.
Provide employment information and personal information such as your legal name, birth date and address.
Once you choose a card, you can apply through the credit card issuer’s website.
What is a good interest rate on a credit card?
Typical credit card interest rates hover around 20%, any rate lower than that could be considered a good interest rate.
More than 30 low-interest rate credit cards on the market offer interest rates lower than 13%, according to the latest data from the Canadian Bankers Association (CBA).
What is the average credit card’s interest rate?
In Canada, the average purchase interest rate for personal cards is around 23%, according to NerdWallet’s analysis of over 194 cards.
Here are interest rate ranges from the Big Six banks for personal credit cards.
BANK | INTEREST RATE RANGE |
|---|---|
TD Bank | 12.90% to 20.99%. |
Royal Bank of Canada (RBC) | 12.99% to 20.99%. |
Canadian Imperial Bank of Commerce (CIBC) | 13.99% to 20.99%. |
Scotiabank | 9.99% to 20.99%. |
Bank of Montreal (BMO) | 13.99% to 20.99%. |
National Bank of Canada | 11.20% to 20.99%. |
Some credit cards offer low promotional interest rates for the first few months, but move to a higher rate once that introductory offer expires. For example, a card may offer 7.99% interest rate for the first six months, but once the promotional period ends, the rate increases to 20.99%.
What is a credit card interest rate?
A card’s interest rate, or APR, is what the issuer charges on any balance that’s left unpaid at the end of the billing cycle. If you don’t repay the full balance by the due date, the interest will be added to your balance. And if you don’t pay off your balance the following month, you’ll incur additional interest. That’s one reason why credit card debt can add up so quickly.
Your credit card agreement and each monthly statement displays the interest rate as an annual percentage, such as 20.99%.
Credit card interest rates vary among cards, financial institutions and even transactions.
Types of interest rates on credit cards
Depending on how you use your credit card, you may see one or more of the following interest rates applied to different transactions.
Purchase interest rate
The purchase interest rate is applied to regular purchases made using the card. This can include anything from a new pair of jeans to a recurring charge for your gym membership.
Cash advance interest rate
When you use your credit card to withdraw cash from an ATM, it’s called a cash advance. You’re not withdrawing your own money — like you would with a debit card, you’re borrowing the cash directly from the credit card issuer. This type of transaction can incur a higher interest rate than regular credit card purchases.
Cash advances are not subject to the interest-free grace period, which means you’ll start accruing interest on this amount you borrow as soon as it’s withdrawn. You might also have to pay a cash advance fee.
Balance transfer interest rate
When you move debt from one credit card to another, a special balance transfer interest rate applies. This rate is often similar to the cash advance rate.
Some issuers offer promotional balance transfer interest rates to entice you to move your credit card balance over from a different card. These promotional rates can be as low as 0%. However, there is typically a time limit attached, such as 0% for the first six months. After the promotional period ends, any balance left unpaid will be subject to the card’s regular interest rate.
Balance transfers can also incur a transfer fee, such as 3% of the transferred amount or $5, whichever is higher.
Fixed vs. variable interest rates
Fixed interest rates are set by the issuer and don’t typically change over time. For example, if your card has a 20.99% fixed interest rate, that will be the rate until the issuer notifies you of any changes.
Variable interest rates are linked to the bank’s prime lending rate, which means they can fluctuate with the market. These rates are often shown as the prime rate plus a base rate, such as prime plus 1.5%. Using this example, if your bank’s prime rate is 7.20%, your interest would be 8.70%.
How interest is charged on a credit card
Most issuers calculate credit card interest based on a daily formula. A basic way to calculate your daily interest rate is to take your annual rate and divide it by 365 days. So let’s say your annual rate is 20%. When you divide that by 365, you get a daily rate of 0.0548%.
Given that most cardholders make purchases and payments throughout the month, many banks use the average daily balance to calculate interest at the end of each billing cycle.
So, to calculate your credit card interest:
Calculate your card’s daily interest rate.
Add up the outstanding daily balances for each day in the billing period and divide by the total number of days.
Multiply the average daily balance by your card’s daily interest rate, then multiply that number by the total number of days in the billing period.
(20% / 365) x 100 ↩︎
» Not into math? Use our credit card interest calculator.
Credit card grace period
Financial institutions in Canada are required to offer a 21-day grace period after a purchase, which begins on the last day of your billing period, as listed on your credit card statement. If you pay off the balance in full during this interest-free grace period, you will not incur any interest charges on that purchase.
However, the grace period only applies to purchases, not cash advances or balance transfers.
How to avoid paying interest on a credit card
To avoid paying credit card interest, pay off your balance in full each month before your interest-free grace period ends. You can ensure that you repay the balance on time by setting up automatic payments each month.
Another way to avoid interest charges — at least temporarily — is to transfer your balance to a credit card offering a 0% interest rate for new balance transfers. Just make sure you can pay off the balance during the promotional period.
Can you negotiate credit card interest?
While credit card interest rates might seem set in stone, there may be some wiggle room. If you have a strong record of paying your bill on time you may be able to request a lower interest rate from your financial institution.
Frequently asked questions
What is the lowest interest rate on a Canadian credit card?
What is the lowest interest rate on a Canadian credit card?
Credit card interest rates can get as low as 8.20%, according to NerdWallet’s analysis. Low rates can vary based on the issuer, the type of card you get (personal or business) and whether it’s secured or unsecured.
Does paying interest on a credit card affect your credit score?
Does paying interest on a credit card affect your credit score?
Paying interest on your credit card doesn’t directly affect your credit score — as long as you make at least the minimum payment by your due date.
If you miss payments or are late paying your credit card bill, you will see the effect on your credit report.
Accumulating a significant amount of debt can have adverse effects on your score, especially if it leads to unpaid bills or raises your credit utilization ratio.
It’s recommended that you use less than 30% of your total credit to maintain a healthy score.
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