The best low interest credit cards in Canada for 2024

• Best low interest credit card: MBNA True Line Mastercard
• Honourable mentions for best low interest credit cards:
  • • • CIBC Select Visa
      • BMO Preferred Rate Mastercard
      • RBC Visa Classic Low Rate Option
• Best low interest credit card with a variable interest rate: National Bank Syncro Mastercard

What to know about credit card interest rates: glossary of terms

• APR: Stands for “Annual Percentage Rate” and it is used by banks to calculate the amount of interest you owe on a credit card. Interest is expressed as an annual measurement similar to how kilometres per hour is used to calculate a car’s speed. The actual interest owed varies depending on the duration of the balance owed. For example, if your card has a 19.99% APR and you carry a balance for just one month, your effective interest rate would be approximately 1.67% (19.99% ÷ 12 months). Most cards will have different APRs for different types of transactions (i.e. purchases, balance transfers, and cash advances).
  
  
• Purchase interest rate: This is the rate that typically comes to mind when you think of credit card interest. It is the rate charged on regular everyday purchases made with your credit card, such as groceries or clothes. The purchase interest rate is only applied if you carry a balance. If you pay off your credit card bill in full and on time every month by the due date shown on your statement, the purchase interest rate is not a factor. This is because there is a 21-day interest-free grace period between monthly billing cycles. However, if you don’t pay off your balance in full, you will lose this grace period and interest will be applied to your purchases as you make them.
  
  
• Balance transfer interest rate: This is the rate you would owe on a balance you move from one credit card to another. Unlike the purchase interest rate, this rate does not come with the benefit of an interest-free grace period. Interest starts accumulating immediately on the transferred balance. The balance transfer rate on a credit card is usually the same as its purchase interest rate (e.g., 19.99% APR on rewards credit cards), but sometimes it can be higher.
  
  
• Balance transfer offer / introductory rate: Balance transfer offers an are an important aspect to consider when discussing balance transfers. Many credit cards come with special offers that significantly reduce the balance transfer interest rate for a limited time. These offers can have APRs as low as 1.99% or 0% and last anywhere from six to twelve months. Taking advantage of these offers can help you pay off old credit card balances at a much lower cost and transition from one credit card to another. Once a balance transfer offer ends, the card will revert back to its regular balance transfer rate.
  
  
• Cash Advance Interest Rate: This is the rate you’d owe if you use your credit card at an ATM to withdraw paper bills. Unlike the previous rates mentioned, there is no grace period for cash advances. Interest is charged daily from the moment of withdrawal until you completely repay what is owed. Sometimes the cash advance rate on a credit card will be the same as its purchase and balance transfer rates, but in many cases, it’s much higher. For example, the MBNA TrueLine Mastercard has an annual purchase interest rate of just 12.99% but a cash advance rate of 24.99%.

Read more: Credit card cash advances – Everything you need to know

How much can you can save with a low interest card?

When a credit card has a low APR, it may not immediately show you how much you could save. After all, credit card bills deal with real dollars, not just percentages. 

To illustrate this, let's consider a real-world scenario using two different credit cards: a typical rewards credit card and the MBNA True Line Gold Mastercard, which we’ve ranked as one of the best low interest credit cards in Canada.

Here’s the scenario:

• You owe a $3,000 balance on your credit card
• Every month, you diligently pay $200 towards your credit card balance to clear your debt

This scenario makes it crystal clear just how much a low interest credit card can benefit your finances. Compared to a typical rewards credit card, with the MBNA True Line Gold, you would save $238 in interest and pay off your balance one month faster.  

Even if we assume the rewards credit card in this example has no annual fee, you would still save a whole lot more on interest with the MBNA True Line Gold, even after considering its $39 annual fee. This clearly demonstrates that you shouldn't dismiss a credit card simply because it has an upfront annual fee. The cost of admission can be well worth it and help you save in the long run.

It’s important to also note that most low interest credit cards typically have lower annual fees to other types of credit cards, such as rewards credit cards. 

How is credit card interest calculated?

As mentioned, APR stands for Annual Percentage Rate and is used by banks to calculate the interest you owe on a credit card if you carry a balance. 

You might read the word “annual” in Annual Percentage Rate, and think that interest is owed once a year. However, in reality, even though interest is expressed annually, it’s actually calculated daily and charged monthly. Let's break it down to clear up any confusion. 

• Consider Credit Card X with an APR of 15.99%. The daily interest rate would be 0.0438% (15.99% ÷ 365)
• To find the daily interest rate of a credit card, simply divide its APR by the number of days in the year.

Now, let's say you have a $3,000 balance on Credit Card X:

• Your daily interest rate would be 0.0438% (15.99% APR ÷ 365 days in the year).
• After one day, you would owe $1.3142 in interest (0.0438% x $3,000).
• Your total balance would increase to $3,001.3142 after one day ($1.3142 in daily interest + your original $3,000 balance).
• On the next day, your new balance of $3,001.3142 would also be charged 0.0438%, resulting in a balance of $3,002.69 on day two. 

There are two important things to remember. First, it’s calculated daily. Second, interest compounds, meaning you’ll be charged interest on top of interest (although, this can vary depending on the card issuer). While a few extra dollars in interest from one day to the next might not seem like much, over time, it can quickly balloon, especially if you continue making new purchases on your credit card. Use our credit card interest calculator to easily see how much interest you'll owe based on how long you take to pay off your balance.

However, it is essential to note that if you pay off your card’s balance in full every month, you won’t owe any interest at all. 

*This is a simplified example assuming no changes in day-to-day credit card activity. Many banks also charge interest based on your average daily balance over a monthly billing period.

What is the difference between a fixed and variable interest rate credit card?

Low interest credit cards come in two varieties: fixed rate credit cards and variable rate credit cards.

The difference between them is quite simple. Fixed rate remains the same, while a variable rate can change based on two key factors: 1) the bank’s current prime rate and 2) your credit score. When it comes to low interest cards, most banks offer either fixed rate or variable rate options but not both.

Each card type has its own advantages.

Fixed rate credit cards provide more straightforward terms. Once you’re approved for the credit card, you’ll know exactly what interest rate you’ll get and it won’t fluctuate regardless of changes in the bank’s prime rate or your creditworthiness. Fixed rate credit cards are also far more likely to come paired with limited-time balance transfer promotions, allowing you to consolidate debts on previous credit cards and pay them off at a lower interest rate.

Variable rate credit cards, on the other hand, have the potential to offer a rock-bottom interest rate (even lower than fixed rate cards), if you have excellent credit. However, the downside is that you might end up with a higher rate if your credit score is not great.

Regarding rewards, if you cannot consistently pay off your credit card in full, there is no point in pursuing points or cash back on a rewards credit card. Most have an APR around 19.99%, and the interest you accumulate would devalue any rewards you earn. In simple terms: a rewards credit card is only worth it if you pay off your statement in full each and every month.

While most low interest credit cards don’t offer rewards, the fact that they charge a lower interest rate compared to rewards cards will put you in a better financial position when carrying a balance.

What is the minimum payment and when do you pay interest on a credit card? 

Like any credit card, you must make at least the minimum payment on a low interest credit card on time every month. Minimum payments are typically $10 or 3% of your balance owing (whichever is higher) and must be paid every 30 days by the date shown on your credit card statement. Failure to do so can result in temporarily losing the primary advantage of low interest cards – their low rates.

We cannot stress enough how important it is to always make your minimum payments on time. If you’re facing new financial difficulties and cannot afford to make your monthly minimum payments, you may want to consider not applying for a new card. Instead, reach out to your bank to inquire about deferring payments on your current credit card.

A deferral allows you to postpone minimum payments for at least one month and may also potentially include a temporary reduction in your interest rate. However, it is important to note that interest will still accrue and rates will return to normal after the deferral period ends. In simple terms, a payment deferral is a short-term solution to address credit card debt while on the other hand using a low interest card is a long term strategy that can help you continuously save on unnecessary interest charges.

Also read:

• The best credit cards in Canada
• The best balance transfer credit cards in Canada
• The best no fee credit cards in Canada
• How to pay off your credit card and reduce interest charges