Credit Card Interest Rates

Learn how credit card interest rates work so you can find a card that suits your financial needs.

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When you use a credit card, you’re essentially borrowing money from the account’s credit limit. Just like any other loan, interest will be charged on the balance. How and when this interest is charged can have a huge impact on what you’ll pay to borrow money using your credit card.

In this guide, you’ll find answers to the most common questions about credit card interest, including the different rates that may apply and how to take advantage of interest-free days so you can avoid interest charges altogether.

What are credit card interest rates and how do they work?

Interest rates are a type of fee that’s charged when you borrow money. With credit cards, interest rates are calculated as a percentage of your balance and shown as an annual percentage rate (APR).

  • For example, a card could have a purchase interest rate of 8.99% APR, while a different card could have a purchase interest rate of 19.99% APR.

Most credit cards also have different interest rates for different types of transactions, with the most common being:

  • A purchase rate
  • A cash advance rate

How is credit card interest calculated?

The interest rate on credit cards is normally shown as an annual figure, but most credit card companies calculate interest on a daily basis and then add the charges to your account at the end of each statement period.

To determine your credit card interest amount, your daily outstanding balance is multiplied by the daily interest rate on your credit card. These daily calculations are then added together at the end of the statement period to get the total interest due.

  • The daily interest rate is calculated by dividing the APR by 365 days.
  • The monthly interest rate is calculated by dividing the APR by 12 months.

As an example, if you have a 19.99% APR and an outstanding balance of $300 on your card:

  • Your daily interest rate will be 0.054%, which has you paying $0.16 in interest a day.
  • Your monthly interest rate will be 1.665%, which has you paying $4.99 in interest per month.

Compound interest costs

The way credit card interest is charged is known as “compound interest” because it is calculated daily. This means that you could end up paying interest on your interest charges. The good news is that you can cut down on interest costs any time you make a repayment, because that will also affect the daily interest calculation.

Types of credit card interest rates

Here are the most common types of interest rates you’ll find on credit cards:ccf interest woman

  • Purchase interest rate. This is the interest you are charged when you use your credit card for making payments in retail outlets or online. You only incur this interest rate if you don’t pay off your full balance by the due date.
  • Cash advance interest rate. This is the interest rate you are charged when you use your credit card for withdrawing cash from ATMs or cash equivalent transactions, like buying gift cards or gambling.
  • Balance transfer interest rate. This is the interest rate you’re charged when transferring an existing credit card debt to a new card.
  • Promotional interest rate. Many credit card providers offer new customers promotional interest rates for purchases and/or balance transfers. This promotional interest rate is only available for a limited time, with the standard interest rate applying after the specified time period. For example, a card may offer you 0% interest on balance transfers for the first 6 months. If you didn’t pay off the balance transfer during the first 6 months, the standard rate for balance transfers would apply to the debt.

Even the smallest difference in credit card interest rates can have a huge impact on costs. When you’re looking for a new card, make sure you compare both the standard and promotional interest rates to help you find one that suits your needs.

Compare credit card interest rates

Name Product Purchase Interest Rate Cash Advance Rate Annual Fee Minimum Income Benefits with this card Description
American Express Cobalt Card
19.99%
22.99%
$120
N/A
Earn 5 Membership Rewards points per $1 spent at eligible grocery stores, restaurants, bars, cafés and food delivery services, and earn 2 Membership Rewards points per $1 spent at eligible gas stations, and on transit and travel purchases, and earn 1 Membership Rewards point per $1 spent elsewhere. Terms apply
Earn up to 40,000 Membership Rewards points. In the first year, earn 2,500 Membership Rewards points for each billing period when you charge at least $500 in eligible purchases to your card (for a total earn of up to 30,000 Membership Rewards). Plus, earn up to 10,000 Membership Rewards points when you spend a total of $3,000 in purchases in your first three months
HSBC +Rewards™ Mastercard®
11.9%
11.9%
$0 annual fee for the first year ($25 thereafter)
N/A
Earn 2 Points for every $1 spent on eligible dining or entertainment purchases.
Earn 10,000 Points ($50 travel value). Plus, get a full annual fee rebate for the Primary Cardholder for the first year. Apply by June 29, 2020. This offer is only available to residents of Canada other than the province of Quebec. Conditions apply.
BMO World Elite Mastercard
19.99%
22.99%
$0 annual fee for the first year ($150 thereafter)
$80,000
Get 3 BMO Rewards points per $1 spent on eligible travel, dining and entertainment purchases (up to $50,000 spend annually), and get 2 BMO Rewards points per $1 spent on all other eligible purchases (and once you reach the $50,000 annual spend).
Earn a bonus of up to 35,000 BMO Rewards points with a minimum spend of $3,000 on eligible purchases in the first three months of card membership ($250 travel value to be used towards a flight booked through bmorewards.com). Plus, get the $150 annual fee waived in the first year.
HSBC World Elite® Mastercard®
19.9%
22.9%
$0 annual fee for the first year ($149 thereafter)
$80,000
Earn 3% in travel rewards on all eligible travel purchases (6 Points per $1 spent) and earn 1.5% in travel rewards on all other eligible purchases (3 Points per $1 spent).
Earn up to 60,000 Points ($300 travel value). Plus, get a full annual fee rebate for the Primary Cardholder for the first year. Apply by June 29, 2020. This offer is only available to residents of Canada other than the province of Quebec. Conditions apply.
Scotiabank Passport  Visa Infinite Card
19.99%
22.99%
$139
$60,000
Earn 2 Scotia Rewards points for every $1 spent on eligible grocery store, dining, entertainment and daily transit purchases, and earn 1 Scotia Rewards point for every $1 spent elsewhere.
Earn up to a total bonus of 40,000 Scotia Rewards points (up to a $400 travel value) in your first year. Earn 30,000 Bonus Scotia Rewards points when you spend at least $1,000 on eligible purchases within the first three months. Apply by July 1, 2020. Plus, earn 10,000 Bonus Scotia Rewards points each year when you spend at least $40,000 annually on eligible purchases (and earn 2,000 Bonus Scotia Rewards points for every additional $10,000 in purchases thereafter).
BMO Preferred Rate Mastercard
12.99%
12.99%
$20
$15,000
Take advantage of an introductory balance transfer offer, annual fee waiver in the first year, and low purchase and cash advance interest rates.
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
Scotia Momentum No-Fee Visa Card
7.99% intro APR for the first 6 months, 19.99% thereafter
22.99%
$0
$12,000
Get 1% cash back on all eligible gas station, grocery store and drug store purchases and recurring bill payments, and get 0.5% cash back on all other eligible purchases.
Get a 7.99% introductory interest rate on all eligible purchases for the first 6 months. Apply by July 1, 2020.
The Platinum Card from American Express
N/A
N/A
$699
N/A
Earn 3 Membership Rewards points for every $1 spent on eligible dining in Canada, 2 Membership Rewards points for every $1 spent on eligible travel purchases as well as hotel and car rental bookings made with American Express Travel, and earn 1 Membership Reward point for every $1 spent on all other eligible purchases
As a new Platinum Cardmember, earn up to 60,000 Membership Rewards points in the fist six months. Earn a Welcome Bonus of 50,000 Membership Rewards points when you spend at least $3,000 on eligible purchases within the first three months. Receive an additional 10,000 Membership Rewards points after six months of cardmembership
American Express AIR MILES Platinum Credit Card
20.99%
22.99%
$120
N/A
Earn 1 AIR MILE for every $5 spent on eligible food, drink, gas and transit purchases (up to an annual spend of $30,000), and earn 1 AIR MILE for every $10 spent on all other eligible purchases (and after the $30,000 annual spend)
Earn a Welcome Bonus of 2,000 AIR MILES when you spend at least $1,500 in eligible purchases within the first three months.
American Express Business Edge Card
19.99%
22.99%
$99
N/A
Earn 3 Membership Rewards points for every $1 spent on eligible business essentials including office supplies, electronics, rides, gas, eats and drinks (up to an annual earn of 75,000 Membership Rewards), and earn 1 Membership Reward point for every $1 spent on all other eligible purchases
Earn up to 42,000 Membership Rewards points in your first year. Earn a Welcome Bonus of 30,000 Membership Rewards points when you spend at least $5,000 on eligible purchases within the first three months, and earn 1,000 Membership Rewards points each month (a total of 12,000 annually) when you spend a minimum of $3,000 on eligible purchases
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Name Product Purchase Interest Rate Balance Transfer Rate Annual Fee Minimum Income Reward Description
BMO Preferred Rate Mastercard
12.99%
3.99% for the first 9 months (then 12.99%)
$20
$15,000
Take advantage of an introductory balance transfer offer, annual fee waiver in the first year, and low purchase and cash advance interest rates.
Get a rate of 3.99% on balance transfers for 9 months with a 1% transfer fee. Plus, get the $20 annual fee waived in the first year.
Scotiabank Value Visa Card
12.99%
0.99% for the first 6 months (then 12.99%)
$29
$12,000
Save on interest for 6 months by consolidating your higher-rate balances with the balance transfer offer, and get an on-going 12.99% interest rate on purchases, cash advances and balance transfers.
Get a 0.99% introductory interest rate on balance transfers with a 0% transfer fee for the first 6 months. Apply by July 1, 2020.
No-Fee Scotiabank Value Visa Card
16.99%
3.99% for the first 6 months (then 16.99%)
$0
$12,000
Save with a low interest rate, no annual fee and a balance transfer offer.
Get a 3.99% introductory interest rate on balance transfers with a 0% balance transfer fee for the first 6 months. Apply by July 1, 2020.
Tangerine World Mastercard
19.95%
1.95% for the first 6 months (then 19.95%)
$0
$60,000
Earn 2% cash back in two categories of your choice (or three categories if you open a Tangerine Savings Account and directly deposit your cash back into the account), and 0.5% cash back on everything else.
Get a 1.95% interest rate on balance transfers for the first six months (valid within the first 30 days of account opening).
Tangerine Money-Back Credit Card
19.95%
1.95% for the first 6 months (then 19.95%)
$0
$12,000
Earn 2% cash back in two categories of your choice (or three categories if you open a Tangerine Savings Account and directly deposit your cash back into the account), and 0.5% cash back on everything else.
Get a 1.95% interest rate on balance transfers for the first six months (valid within the first 30 days of account opening).
BMO AIR MILES Mastercard For Students
19.99%
1.99% for the first 9 months (then 22.99%)
$0
$15,000
Earn 2 AIR MILES for every $20 spent at eligible AIR MILES partners, and earn 1 AIR MILE for every $20 spent elsewhere.
Receive up to 800 AIR MILES Bonus Miles. Plus, get a 1.99% introductory interest rate on balance transfers for 9 months. A 1% fee applies to balance amounts transferred.
BMO CashBack Mastercard For Students
19.99%
1.99% for the first 9 months (then 22.99%)
$0
$15,000
Get 1% cash back on all eligible purchases.
Get up to 5% cash back in the first three months (up to a maximum spend of $2,000). Plus, get a rate of 1.99% on balance transfers for 9 months, with a 1% fee for every transferred balance.
BMO AIR MILES Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
$0
$15,000
Get 2 AIR MILES for every $20 spent at eligible AIR MILES partners, and get 1 AIR MILE for every $20 spent elsewhere.
Earn up to 800 AIR MILES Bonus Miles. Plus, get a rate of 1.99% on balance transfers for 9 months. A 1% fee applies to transferred balances.
BMO CashBack Mastercard
19.99%
1.99% for the first 9 months (then 22.99%)
$0
$15,000
Get 1% cash back on all eligible purchases.
Get up to 5% cash back on all eligible purchases in the first three months of card membership (up to a maximum spend of $2,000, and earn 1% cash back thereafter). Plus, get a rate of 1.99% on balance transfers with a 1% balance transfer fee for nine months.
Scotia Momentum Visa Card
19.99%
2.99% for the first 6 months (then 22.99%)
$39
$12,000
Earn 2% cash back on all eligible gas station, grocery store and drug store purchases and on recurring bill payments (up to a $25,000 annual spend), and earn 1% cash back on all other eligible purchases (and on all eligible purchases once the $25,000 annual spend is reached).
Get a 2.99% introductory rate on balance transfers and a 0% balance transfer fee for the first 6 months. Apply by July 1, 2020.
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*The products compared on this page are chosen from a range of offers available to us and are not representative of all the products available in the market. There is no perfect order or perfect ranking system for the products we list on our Site, so we provide you with the functionality to self-select, re-order and compare products. The initial display order is influenced by a range of factors including conversion rates, product costs and commercial arrangements, so please don't interpret the listing order as an endorsement or recommendation from us. We're happy to provide you with the tools you need to make better decisions, but we'd like you to make your own decisions and compare and assess products based on your own preferences, circumstances and needs.

Comparing credit card interest rates

To show you how important it is to compare interest rates, let’s say you have a balance of $1,000 on a credit card with an interest rate of 20.99% APR. If you only made monthly payments of $50 on this debt, it would take you around 2 years to pay off your balance and would cost you about $212 in interest.

On a credit card with an interest rate of 15.99% APR, it would still take around 2 years to pay off your balance but would cost you $153 in interest. That’s a saving of $53 compared to the card with a higher rate, which is basically another monthly repayment. The bigger the difference in rates, the greater these potential savings would be.

What else do I need to know?

As well as interest rates, make sure you consider the following when you’re looking for a new credit card:

  • Interest-free days. Many credit cards offer up to a certain number of interest-free days on purchases when you pay your account balance in full by the due date on your statement. You should be offered a minimum of 21 interest-free days up to a maximum of 55 days. This gives you a way to avoid paying interest charges for spending on your credit card.
  • 0% interest rate offers. If you get a credit card with a promotional 0% interest rate, it may only apply for certain types of transactions. For example, you could get 0% interest on balance transfers for 6 months but still have to pay the standard variable interest rate for any new purchases made during that time.
  • Annual fee. Many credit cards charge an annual fee, which could also add to your account balance. Remember to factor this cost in when comparing credit cards and when budgeting for interest costs and repayments.
  • Other features. Many credit cards offer complimentary extras such as insurance or rewards, which could help offset the cost of the annual fee and interest charges. Weigh the value of the benefits against potential costs so you can decide if a card is worth it based on your spending habits and goals.

Bottom line

When applying for a credit card, it’s important that you read the fine print to understand all of the terms and conditions of your agreement. Understand how much you will be charged for each type of transaction you make in order to plan your repayments and responsibly use your credit card.

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