Trying to get out of debt and looking to save on interest charges? Interest-free credit cards offer you a period of time when no interest is charged on your account balance. While some countries offer 0% purchase credit cards, these cards don’t seem to be offered on the Canadian market currently. So, this leaves us with one type of interest-free credit card: the balance transfer card. This type of credit card can offer 0% interest for a specified period of time, however, there are some things to watch out for.
What types of credit cards offer 0% interest?
While 0% purchase credit cards are not available on the Canadian market, there are occasionally a few 0% interest balance transfer credit cards to choose from. These cards usually offer introductory 0% interest on balance transfers for a specific period of time – usually 3 to 10 months.
0% balance transfer credit cards
A 0% balance transfer credit card offers an interest-free period on existing credit card debt that you move onto the new card. The 0% interest rate will typically last anywhere from 3 to 10 months, depending on the offer. This gives you the opportunity to repay your debt without collecting any additional interest, which can help you put more money towards paying off the principal balance faster. Keep in mind you will be charged interest on any new purchases you make on a balance transfer credit card.
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When will I be charged interest on a 0% balance transfer credit card?
If you make new purchases. When you make a purchase on this type of card, the interest rate for purchases will usually apply from the time the transaction is made. This means you won’t have a “grace period” where no interest is charged.
If you use your card for a cash advance or cash equivalent transaction. With these types of transactions, interest charges and fees will apply from the time they are made. Be aware that cash advance charges tend to be steep.
Ifyou don’t pay off your balance transfer debt by the end of the introductory period. If the balance transfer interest-free period ends and you have an outstanding balance to pay, you’ll start collecting interest on it. The interest rate that kicks in once the intro period is up is known as the revert rate.
The credit card grace period
Also known as the “grace period”, credit card providers in Canada must offer a minimum of 21 days where they charge you no interest on the balance owing. As long as you pay your balance back in full by the time it is due, you will avoid facing interest charges.
While the grace period can seem like a gift from the banks, it is in fact a risky time if you don’t pay off your credit card balance in full. Even if you pay back a portion of what you owe before the due date, banks and credit card providers can charge you interest on the entire sum of owed money, dating it all the way back to the purchase date.
Let’s say you bought a new camera for $1,200 on 21 July. If the billing cycle for your card ends on 15 August and your payment is due on 5 September, you will need to pay the entire $1,200 balance by this date in order to avoid interest charges.
If you decide to pay only $1,000 by 5 September and pay the remaining $200 on 10 September, you will incur interest charges on the entire $1,200 balance dating back to the purchase date of 21 July. This means you’ll be charged interest on $1,200 for 31 days plus an additional 5 days of interest charged on the late $200 balance.
How to compare interest-free credit card offers in Canada
If you want to get a credit card with an interest-free period, consider the following features:
Introductory period. If the card offers a promotional 0% interest rate for balance transfers, check how long the introductory period is available for. Consider your budget and calculate whether or not you can repay the balance you put on the card while the introductory offer is in place. If not, you might want to look for a card with a longer promotional interest-free period. Balance transfer intro periods generally last from 3 to 10 months, sometimes longer.
Standard interest rates. The standard variable purchase and balance transfer rates for credit cards usually sit around 19.99%, however they can be as high as 36% APR. Make sure you check what the promotional rate reverts to when comparing options so that you can budget for any interest charges that may apply if you’re still carrying a balance at that time.
Grace period requirements. Credit cards that offer interest-free days – more commonly known as a grace period – for each statement cycle usually have specific conditions around eligible purchases and repayments. For example, cash advances are not eligible for interest-free days and you must pay your balance in full by the due date on each statement.
Rewards programs. Some cards earn rewards or travel rewards points for every $1 spent on the card. These programs can provide extra value, but be careful you don’t overspend in order to get more rewards, otherwise you may end up with unnecessary debt since you’ll be charged a revert rate on any new purchases.
Complimentary extras. Many cards offer complimentary extras such as international travel insurance, purchase protection, extended warranty coverage and concierge services. These perks may add value to your card – but only if you actually use them.
Annual fees. Card costs can range from $0 to over $700 each year. Make sure that the cost of the annual fee doesn’t offset the interest savings you’ll make from the interest-free offer. You may want to consider a credit card with no annual fee to help save on your costs.
Balance transfer fees. Some cards have a one-off processing fee of 1% to 5% of your total balance when you apply for a balance transfer. If you choose an interest-free card for your existing debt, make sure you look for this fee when comparing options so you can find one that’s affordable.
Interest-free credit cards can be a convenient and affordable way to focus on paying off your debts. While 0% purchase credit cards have yet to make their way into the Canadian market, some banks and credit card providers offer introductory interest-free balance transfer cards. These interest-free intro periods last anywhere from 3 to 10 months usually. However, it’s important to compare your options to find the right type of card for your needs.
Yes, regardless of the type of interest-free credit card you choose, you will still need to pay at least the minimum amount required by the due date on your statement.
Regardless of the type of interest-free credit card you choose, you still need to make repayments by the statement due date each month. If you fail to maintain these regular repayments, some of the repercussions you could face include:
Interest charges. If you don’t pay your balance in full by the statement due date, interest will be applied to the remaining debt.
Late payment fees. If you don’t make a payment by the statement due date, a late payment fee may be applied.
Overlimit fees. A fee can apply if you don’t repay your credit card balance and go over your available credit limit.
Cancelled promotional interest rates. If you don’t pay the balance, the interest-free promotion may no longer apply. This penalty varies depending on the card, so make sure you check the terms of your offer.
Bad credit. Failing to make repayments could have a negative impact on your credit score – especially if your account goes into default.
If you’re struggling to make a repayment by the due date on your statement, it’s important to contact your credit card provider as soon as possible. Customer service staff will assess your situation and discuss repayment options based on your individual circumstances.
Just as there are different types of interest-free offers available, there are many potential "best" interest-free credit cards depending on your individual spending habits and financial goals. Instead of looking for a single "best" card, compare a range of options based on your goals to help you find the right 0% interest rate card for you. When making your comparisons, remember to consider the ongoing features and costs of the card.
The interest-free period varies from card to card. In general, it can range from 3 to 10 months if you have a card with a promotional 0% balance transfer offer.
Many banks, credit unions and online credit card providers offer balance transfer credit cards. You can usually balance transfer to any bank and credit card, excluding banks you currently have a credit card with. This is because a bank you are already a customer of is not going to compete with itself and give you an interest-free balance transfer card when you likely have taken advantage of that offer already.
Yes. Transferring your existing balance after a 0% balance transfer promotion has ended is allowed. Note that any balance transfer request will be subject to lending criteria and approval from the credit card provider. You'll also need to transfer it to a different provider since the same bank or credit union is not going to offer you another 0% interest balance transfer card.
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Yes, this is generally accepted across balance transfer credit cards. Once you have repaid your outstanding balance, you can cancel the credit card anytime.
Yes, you will still receive statements and be required to make minimum monthly payments. In some cases, the no interest offer may be removed if you miss a payment.
If you want to save on credit card costs, it's wise to pay more than the minimum amount each month. Ideally, you should aim to pay the balance off completely before the introductory 0% interest period ends. Otherwise, any debt remaining will attract interest at the revert rate for that card, which will be much higher than 0%.
Any unpaid balance will be charged at the standard variable rate described in the Product Disclosure Statement. Also known as the revert rate, this is usually either the standard purchase rate or cash advance rate. To avoid any nasty surprises, make sure you learn what these rates are before you apply.
You could potentially move your debt to a new balance transfer card in order to avoid paying interest again for another period of time, however this will require finding a new card, applying and likely paying a 1-5% balance transfer fee.
Many credit cards offer an interest-free period for purchases during each statement or billing period. To enjoy paying no interest through this feature – also known as the grace period – you will need to pay your account balance in full by the due date on each of your statements. You'll then get up to a certain number of days interest-free for purchases made in the next statement period.
There are a few fees to look for when you want to transfer your existing debt to a card offering 0% interest on balance transfers during the introductory period, including:
Balance transfer fee. Some 0% balance transfer credit cards charge a one-time fee for processing the transfer. This is usually around 1-5% of the total debt moved to the new card. It's worth factoring in when you're comparing cards to help you find one that's affordable, since this can be a substantial amount of money if you're moving a lot of debt.
Annual fee. Usually, credit card annual fees are charged when you first open an account. What's more, many credit card providers classify the annual fees as a new purchase, which means you could be charged interest at the card's purchase rate if you don't pay it off in full.
Interest on purchases. You'll be charged interest at your card's standard purchase rate if you use it for new purchases. If you can avoid using the card and focus on paying down the balance transfer debt, you'll be able to make the most of the 0% interest period for your balance transfer.
Yes, it's possible you could get a credit card that offers 0% interest (on a balance transfer) and a $0 annual fee. For example, some credit cards with no annual fees will also offer an introductory 0% interest rate for balance transfers. Many of these cards also offer interest-free days on purchases if you pay your balance in full by the due date on each statement.
Another option is to look at a 0% balance transfer card that waives the annual fee in the first year. However, this will give you no fees and no interest for the introductory period only.
Jeremy is finder's Global Head of Publishing & Editorial. Jeremy has been with finder since the very beginning and is part of the founding team working closely with Fred and Frank to build finder.com into the comparison network it is today.
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