Credit Card Interest Explained (Canada)
Credit card interest is one of the most misunderstood — and expensive — types of debt in Canada. This guide breaks down how credit card interest works, why balances grow quickly, and how to reduce or eliminate interest costs.
What Is Credit Card Interest?
Credit card interest is the cost you pay for carrying a balance past your statement due date. Most Canadian credit cards charge 19.99% APR, although some cards charge 29.99% or higher.
You can see the real impact of interest using the Credit Card Interest Calculator.
How Credit Card Interest Is Calculated
Unlike mortgages or car loans, credit cards use daily compounding interest. This means interest builds on interest every single day.
The Formula Used by Canadian Banks
Daily interest rate = APR ÷ 365 Example: 19.99% ÷ 365 = 0.05477% per day
Then:
Daily interest = balance × daily interest rate
Use our Credit Card Calculator to see how long it takes to pay off a balance.
Example: $3,000 Credit Card Balance at 19.99%
| Minimum Payment | Time to Pay Off | Total Interest |
|---|---|---|
| $90 | ≈ 5.5 years | ≈ $1,400 |
| $150 | ≈ 2.4 years | ≈ $600 |
Try your own numbers in the Credit Card Interest Calculator.
Why Credit Card Interest Adds Up So Fast
1. High APR
Unlike mortgages (4–6%) or car loans (4–12%), credit cards usually start around 19.99%. High APR = high daily interest.
2. Compounding Daily
Every day you carry a balance, interest is charged again — including on previous interest.
3. Minimum Payments Are Too Low
Minimum payments often cover only interest and a tiny amount of principal.
4. Continuous Spending
New purchases add to your balance immediately unless you pay in full.
How to Avoid Paying Credit Card Interest
1. Pay Your Balance in Full
If you pay your full statement balance by the due date, you pay zero interest. This is the biggest advantage of credit cards.
2. Make Extra Payments
Paying even $20–$50 extra reduces your total interest significantly. Use our Debt Payoff Calculator to see the difference.
3. Consolidate High-Interest Debt
Consolidating credit card balances into a lower-rate loan can reduce your monthly payments and save you thousands. Compare interest using the Loan Calculator.
4. Use a Balance Transfer Card
Some Canadian banks offer low or 0% promo balance transfer rates for 6–12 months.
5. Improve Your Credit Score
Higher credit scores may qualify you for lower APR cards.
Credit Card Grace Period in Canada
Most credit cards offer a 21-day grace period. During this time, no interest is charged on new purchases if the previous balance was fully paid.
Types of Credit Card Interest Rates
- Purchase APR – Charged on new purchases
- Cash Advance APR – Usually 21–23%, no grace period
- Balance Transfer APR – Often promotional
- Penalty APR – High rate applied if you miss payments
Credit Card Interest vs Other Loans
| Loan Type | Typical APR |
|---|---|
| Mortgage | 4% – 6% |
| Car Loan | 4% – 12% |
| Personal Loan | 6% – 12% |
| Credit Card | 19% – 29% |
FAQ: Credit Card Interest
How do I completely avoid interest?
Always pay your full statement balance by the due date.
Is 19.99% APR normal in Canada?
Yes — it is the standard rate for most Canadian credit cards.
Are cash advances bad?
Yes — they charge higher APR and start accumulating interest immediately. Use our Credit Card Calculator to see the cost.
Why is my balance not going down?
Minimum payments mostly go toward interest, not principal. Use extra payments or consolidation.
Related Tools
- Credit Card Interest Calculator
- Debt Payoff Calculator
- Loan Calculator
- Savings Calculator
- Read more articles
Final Thoughts
Credit card interest can grow quickly, but with the right strategies — paying on time, making extra payments, consolidating debt, and using tools on LoanCalc.ca — you can reduce or even eliminate interest entirely.