How does credit card interest work in Canada?
Credit card interest is not complicated, but it is easy to misunderstand. The key idea: paying in full means the card is free money for a few weeks. Paying less means it starts charging you every day.
The grace period
Each month your card issues a statement. Pay the full statement balance by the due date and you pay no interest on those purchases. Canadian rules require issuers to give at least 21 days between the statement date and the due date for this.
Pay only part of it, and interest typically applies to the unpaid balance, and often to new purchases too, until you are back to paying in full.
What a balance really costs
| Example (illustrative) | Number |
|---|---|
| Balance | $1,000 |
| Annual rate | 19.99% |
| Daily rate (rate / 365) | about 0.055% |
| Interest per day | about $0.55 |
| Interest over 30 days | about $16 |
It looks small, until the balance stays for a year. At the same rate, a $1,000 balance left untouched costs roughly $200 in interest over twelve months.
The minimum payment trap
Paying only the minimum keeps the account in good standing but barely reduces the balance, because most of it goes to interest. Read our breakdown: the credit card minimum payment trap.
How to pay as little interest as possible
- Pay in full by the due date whenever you can. Set up autopay for the full statement balance.
- Avoid cash advances. No grace period, plus fees.
- If you carry a balance, put every extra dollar on the highest-rate card first. See snowball vs avalanche.
- Ask for a lower rate. A call to your issuer costs nothing, and a good payment history helps.
Looni is being built to scan your statements for hidden fees, forgotten subscriptions and junk charges, and show you what to fix first. Canadian-built, launching soon.