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No one likes paying interest.
But, sadly, it’s not easy to avoid.
Whether you’re buying a house, a car, or getting a student loan, interest is inevitable (unless you have enough money in the bank, of course, and if that’s the case…tell us your secrets!).
Even though interest is a pretty common occurrence, not everyone knows how it works or how quickly those pesky interest payments can add up.
The same can be said when it comes to credit card interest. And unfortunately, that 20% interest can add up fast…
But one thing is for sure, we all want to avoid it.
Credit card debt is even listed as the average millennials’ biggest fear.
And that’s where our credit card interest calculator comes in.
Find out exactly how it works right here.
Summary of the best low interest rate credit cards
First, here is a summary of the best low interest credit cards in Canada.
|Credit Card||Current Welcome Offer||Interest Rates||Annual Fee||Apply Now|
|MBNA True Line Gold Mastercard||None||* 8.99% on purchases and balance transfers
* 24.99% on cash advances
|HSBC +Rewards Mastercard||10,000 bonus points (terms)||* 11.9% on purchases, cash advances, and balance transfers||$25, annual fee rebate for the first year||Apply Now|
|National Bank Syncro Mastercard||$100 cash back (terms)||* Prime plus 4% on purchases, minimum of 8.9%
* Prime plus 8% on cash advances and balance transfers, minimum of 12.9%
So, how does credit card interest work?
Credit card interest can be a little complicated. There are different types and different rates, and we’ve written an in-depth article about credit card interest ‒ so we’ll just cover the basics here.
When do I get charged interest?
When you don’t pay your balance in full, you’ll be charged interest on what’s remaining.
Say you have $5,000 in charges you’re paying off. At a typical purchase interest rate of 19.99%, every year you’re paying $999.50 in interest (assuming you’re just paying the interest and not paying down the $5,000.)
$5,000 * 19.99% = $999.50
I don’t know about you, but I don’t have $1,000 to just hand over to the bank.
But, if you’re locked in with a credit card, and can’t seem to pay it off, you might feel like you have no choice.
How can I get relief from credit card interest?
To lower the amount of interest that you’re paying, you could consider switching to a card that has a low
This card comes with a balance transfer promotion of 1.99% for 10 months. This is what you would save if you moved your balance to this card:
- During those 10 months, you’d save $750 in interest on a $5,000 balance, putting a lot more money in your pocket or towards your actual balance.
Another option would be to call your credit card company and ask for a lower rate – the worst they could say is “no.”
Our credit card interest calculator
Now that you have a few of the basics down, here’s a tool you could use to stay informed on:
- how much interest you’re paying,
- how long it’ll take you to pay off your card (based on your current payments), and
- how much you could save with a lower interest credit card.
Simply enter in your current balance, as well as how much you’re paying towards your credit card bill each month.
Then you can use the sliders to set your credit card’s current interest rate.
Our calculator will then tell you how many months it will take to pay off your balance, and how much interest you’ll be paying in total.
Brace yourself – this could be a pretty sobering number.
But remember, it’s better to know so you can start working towards erasing your debt…instead of remaining in the dark and letting it snowball.
If you’re considering applying for another card to take advantage of a balance transfer offer, slide the “New Rate” slider to the interest rate that you’ll be getting with the new card, to see how much interest you’ll be able to save.
It’s a great tool to help you make some financial plans, and, ultimately, save you money
A few things to remember
While we all know that no one wants to pay credit card interest, sometimes the unexpected happens and we’re left unable to pay off our credit card balance in full.
1. Always pay more than the minimum payment
If you’re in this position, always pay more than the minimum payment required. When you only pay the minimum amount on your credit card, only a very small portion of that goes towards your balance.
The actual amount of the ‘Minimum Payment’ a credit card requires you to pay depends on the card itself, but it can be as low as $10 + any interest charges.
If you have a balance of $2,000 and you’re only paying $10 towards the balance, you’re going to have that credit card debt hanging over your head for about 200 months. Even just by adding an extra $10 to your minimum payment, you’ll be cutting that time in half.
But we suggest you pay as much as you can – the sooner you can get rid of that debt, the more money you’ll save in interest charges.
2. Be careful of promotional balance transfer rates
If you’re using a balance transfer promo, do what you can to pay off your full balance in full during your promotional period. Often, when that low intro rate is over, balance transfer interest rates will jump up even higher than the typical 20% you were paying in the first place – putting you in an even worse position.
3. Reach out to a financial planner for help
If you find yourself really struggling, reach out to a professional sooner rather than later. Financial counsellors are a great resource to help you get back on track before it’s too late.
Best low interest credit cards
Need help saving on credit card debt? Here are the best low interest credit cards currently available.
The best balance transfer offer in Canada right now is the
For the first 10 months, you’ll enjoy a low rate of 1.99% on balance transfers made to the card. Afterwards, you’ll be able to earn Best Western Rewards on your purchases. And it’s all for no annual fee.
For the lowest, permanent interest rates you can get, the
Want to earn some rewards and get low interest rates as well? The
For interest rates, you’ll see a low rate of 11.9% on purchases, cash advances, and balance transfers.
Plus, you can earn up to 2 points per $1 spent on your purchases, which translates to a return of up to 1%. It has a low annual fee of $25, that’s currently rebated for the first year.
While the interest rates vary with the prime rate, the
The purchase rate is prime + 4%, with a minimum rate of 8.9%. As long as the prime rate stays under 3.9% (and it currently is), it has the lowest purchase rate you can find.
The cash advance and balance transfer rate also varies with the prime rate – prime plus 8%, with a minimum rate of 12.9%.
These low rates are for an annual fee of $35.
Let us know what you think
Were you surprised at how quickly credit card interest can add up?
Are there any other tools that can help you get the most out of your credit card?
Here are some frequently asked questions about credit card interest.
What is the typical interest rate credit cards charge?
Most credit cards charge a typical interest rate of around 20%. However, some cards offer lower interest rates. The MBNA True Line Gold Mastercard for instance offers a low rate of 8.99% on purchases and balance transfers.
What’s the best credit card balance transfer offer?
The best balance transfer offer to help save on credit card debt is the Best Western Rewards Mastercard, which offers 1.99% interest for 10 months on balance transfers.
How can I figure out how much I can save on interest with a new credit card?
Our interest calculator can help determine how much you can save on credit card interest. Simply enter in your current debt, current interest rate, new interest rate, and the amount you can afford to pay monthly. You’ll see how much you can save, and how long it will take to pay off your debt.