Best Low Interest Credit Cards in Canada for April 2024
What You Should Know
- Low interest rate cards typically have an interest rate of around 12.99%.
- Some credit cards have promotional balance transfer rates of as low as 0%.
- Low interest credit cards usually have an annual fee from $0 to $29.
- Most low interest credit cards with low annual fee have no additional perks or bonuses, but some higher-end low interest credit cards may have valuable rewards.
What Is a Low Interest Credit Card?
Low interest rate cards usually have purchase interest rates of around 8.99% to 12.99%. The best credit cards in Canada usually have a high interest rate, but they offer great perks. Low-interest credit cards allow you to keep the balance and pay a fraction of what you would have paid on a regular credit card. For comparison, most credit cards have an interest rate of 19.99%. Some credit cards may also offer promotional balance transfer periods with interest rates of 0% to 2.99% for 6 to 12 months.
Most low interest credit cards do not have any benefits apart from a low interest rate. A low interest credit card should be used when you need to keep a balance on your credit card. This will help you save on the interest you pay. On the other hand, low interest credit cards may not be great for collecting credit card rewards, getting access to insurance on products, or using any other perks.
Best Low Interest Credit Cards
How we Sort Credit Cards: We sort credit cards based on the card's purchase rate. If the purchase rate is the same for both cards, we look at the lowest annual fee. The goal of a low-interest credit card is to lower interest charges on balances. We focus on interest rates and annual fees for this category to achieve this goal.
$39.00
Purchase: 8.99%
Cash: 24.99%
Transfer: 8.99%
No Income Required
580
or More
$399.00
Purchase: 9.99%
Cash: 9.99%
Transfer: 9.99%
Individual: $12,000
660
or More
Rewards: Scene+ Points
1 Scene+ Point ≈ ¢0.7
- 2 Scene+ Points for each $1 spent on: all eligible purchases.
$0.00
Purchase: 10.90%
Cash: 12.90%
No Income Required
580
or More
For
Members
$295.00
For Non-Members
$395.00
Purchase: 11.90%
Cash: 12.90%
Household: $200,000
Individual: $150,000
660
or More
Cash Back
- 4% Cashback for each $1 spent on: transit, restaurants and entertainment.
- 3% Cashback for each $1 spent on: travel and grocery.
- 1.75% Cashback for each $1 spent on: everything else.
How a Low Interest Credit Card Can Help You Save
If you carry a balance on your card, a low interest credit card can help you save money compared to a typical credit card. A typical credit card has an interest rate of 19.99%, while a low interest rate card usually has an interest rate of 12.99%. This difference in interest rates can lead to a large difference in financing costs when you carry a balance.
Low Interest Credit Card Comparison Calculator
| Typical Credit Card | Low-Interest Credit Card | |
|---|---|---|
| Card Balance | $1,500.00 | $1,500.00 |
| Months to Pay Off | 12 Months | 12 Months |
| Interest Rate | 19.99% | 12.99% |
| Monthly Interest Rate | 1.67% | 1.08% |
| Monthly Payment | $138.94 | $133.97 |
| Total Interest | $167.33 | $107.63 |
You will always have less interest to be paid on the balance of a low interest credit card than on the balance of a regular credit card. The amount of interest saved depends on the credit card balance and the number of months you are planning to pay it off.
How to Calculate Credit Card Interest
To calculate the interest you will pay on your credit card balance, you need to know two things:
- Your APR: The annual percentage rate charged on unpaid balances. It typically ranges from 8.99% to 12.99% for low interest credit cards.
- Your Average Daily Balance: The sum of all your daily balances divided by the number of days in the billing period.
To calculate your interest charges, you need to multiply your average daily balance by the number of days in the billing period and then multiply that by your APR.
For example, let's say you have a credit card with an APR of 12.99%. Your average daily balance is $1,000, and the billing period is 30 days. To calculate your interest charges, you would multiply $1,000 by (12.99% / 12) to get $10.83 in interest charges.
You can use this same formula to calculate the interest you have to pay on many other loans, including interest on a mortgage loan.
The best way to save money is to pay your balance in full every month so you don't pay any interest. If you have to carry a balance, a low interest credit card can help you save some money on interest. The graph below compares the most common interest rates of different types of credit cards.
APR of Various Credit Card Types
How to Lower Credit Card Interest Rate
Option One: Ask Your Credit Card Provider for a Lower Interest Rate
Sometimes, your existing provider may reduce your rate if you call them. This works best if you have been a customer for a long time and if you have always made your payments on time. Although it’s rare, many have experienced success in reducing their interest rates by multiple percentage points. You must have been a great customer with an exceptional credit score.
How to Negotiate Lower Credit Card Interest Rate
If you're looking for a low interest credit card, you can negotiate a lower interest rate with your current credit card company. Here are a few tips to get started:
- Know Your Credit Score: Check your credit score before talking about lowering your credit card interest rate. This will help you understand what interest rate you qualify for.
- Contact Your Credit Card Company: Ask to speak to a representative about lowering your interest rate.
- Be Prepared: Explain why you're requesting a lower interest rate, such as a recent change in your financial situation.
- Discuss: Ask what the company can do to lower your interest rate and be prepared to compromise.
- Last Resort: Consider switching to a new credit card with a lower interest rate.
Option Two: Get a Credit Card With a Lower Interest Rate
Some credit cards specialize in balance transfers. Balance transfer credit cards will allow you to pay off your current credit card balance at a lower interest rate. This can be a great way to save money on interest, but make sure you read the fine print before doing this. Nowadays, many credit cards offer instant approval, which allows you to be approved for a credit card within minutes. Some credit cards will charge a balance transfer fee, and you will want to ensure that the interest rate on the new card is lower than the interest rate on your old card.
Additional Considerations
Aside from comparing credit cards based on the interest rate, consider the following factors to empower your decision.
Annual Fee
There are some no-fee credit cards with no interest, but usually the cards with an annual fee have even lower interest rates. If you are switching to a low interest rate card with an annual fee, you’ll want to make sure the fee doesn’t counteract your interest rate savings. However, many cards offering a yearly fee may waive it in the first year. This means you could transfer to the lower rate card and close it before you’re required to pay an annual fee.
Promotional Rate
Some credit cards offer a promotional interest rate for a certain period. For example, you may get 0% interest on balance transfers for the first ten months. After the promotional period, the interest rate will return to the regular rate. However, you may be charged a balance transfer fee. This fee is usually around 1% to 3% of your transfer amount.
Fixed Vs. Variable Rate
Some low interest credit cards have a fixed interest rate, while others have a variable interest rate. A fixed interest rate means that the interest rate will not change over time. A variable interest rate means the interest rate will change as the prime rate or a certain index changes. Variable rates are usually a few percentage points higher than the prime rate.
Secured Vs. Unsecured
If you have a bad credit score, you may only be able to get low interest rates with a secured credit card. A secured credit card requires a security deposit, which is typically the same as your credit limit. For example, if you deposit $500 for your secured card, your limit would only be $500.
Even though a secured credit card is a good instrument to improve your credit score, you will not be able to spend money that you do not have. If you have a good credit score, you should be able to qualify for an unsecured card. Unsecured credit cards do not require a security deposit.