If there’s a chance you’ll carry a credit card balance from month to month; you should look for a low interest credit card. Low interest credit cards have interest rates that are lower than typical credit cards (for example, 12.99% versus 19.99%) which will result in less accumulated interest if you can’t pay off your balance in full.
Low interest credit cards are also useful “backup credit cards” or credit cards to use in case of emergencies. If you have to charge an emergency flight home to your credit card, you won’t rack up as much in interest charges if you don’t pay off your purchase within the 21 day grace period.
Below we’ve compiled a list of the best low interest credit cards in Canada for 2020.
The best low interest credit cards in Canada for 2020
|Credit Card||Purchase Interest Rate (APR)||Annual Fee|
|MBNA True Line® Gold Mastercard® (VIEW)||8.99%*||$39|
|MBNA True® Line Mastercard® (VIEW)||12.99%*||$0|
|BMO Preferred Rate MasterCard (VIEW)||12.99%||$20 (waived for 1st year)|
|Scotiabank Value Visa (VIEW)||12.99%||$29|
|National Bank Syncro Mastercard (VIEW)||Prime rate + 4% (minimum of 8.90%)||$35|
|Home Trust Secured Annual Fee Visa Card (VIEW)||14.99%||$59|
|Can’t choose? Find the right card for you here.|
*Rates vary for residents of Quebec
1. MBNA True Line® Gold Mastercard®
The MBNA True Line Gold Mastercard is one of the few credit cards to offer a fixed interest rate in the single digits (8.99% on purchases; cash advances are closer to the status quo at 24.99%).
In addition to its rock-bottom APR, this card also features a 0% introductory rate on balance transfers for the first six months for eligible new applicants (an additional fee of 3% of the transferred amount or a minimum of $7.50 also applies). That’s an enticing bonus for cardholders looking to consolidate and more easily manage their outstanding debts on a single card. There is an annual fee of $39 and no minimum income required to qualify for this credit card.
Why we like it:
The MBNA True Line Gold Mastercard is the quintessential low interest credit card: It has the lowest fixed interest rate in Canada as well as the lowest promotional interest rate on balance transfers. The icing on the cake: You can take advantage of the promotional balance transfer option up to 90 days after opening your account instead of immediately, which isn’t the case for several other credit cards.
This credit card offers around the clock fraud prevention, 24/7 customer service and a variety of insurance options if you book travel and make purchases with this credit card.
2. MBNA True Line® Mastercard®
In the Venn diagram of features most sought after by those looking to minimize their credit card debt, the MBNA True Line Mastercard has some considerable overlap. The card has no annual fee, a below-average purchase interest rate of 12.99% and boasts a competitive twelve month introductory rate of 0% on balance transfers (plus a 3% fee on the transferred amount of at least $7.50) for eligible cardholders who are approved.
Why we like it:
First and foremost: The 12.99% fixed interest rate on purchases is considerably lower than the standard 19.99% found on most cards, especially when considering the fact it charges no annual fee. To put things in perspective, most low interest credit cards from the big banks are usually accompanied by some annual fee.
Plus, not only does this card have the best balance transfer promotional rate in the country at 0%, it lasts a whole year. That’s the longest promotional period for balance transfers on this list and is even six months longer than the offer provided by the Gold version of this card highlighted above. Lastly, while most credit cards require you to apply for a balance transfer at the time of your application, the MBNA True Line Mastercard gives you the flexibility to apply for a transfer within 90 days of opening the account. This extra time gives you considerable leeway when planning your debt repayment strategy.
The MBNA True Line Mastercard isn’t packed with perks like many other fee-based credit cards, but it does offer you fraud protection and access to 24/7 customer service.
3. BMO Preferred Rate Mastercard
The BMO Preferred Rate Mastercard has a $20 annual fee and charges 12.99% on purchases, cash advances and balance transfers. You need to earn at least $15,000 per year to qualify for this credit card. As a special welcome offer, the BMO Preferred Rate Mastercard offers a 3.99% introductory interest rate on balance transfers for nine months, plus a 1% fee.
Why we like it:
The interest rate of 12.99% is among the lowest in Canada and doesn’t only apply to purchases and balance transfers, but cash advances as well. The balance transfer promotional period is also longer than those offered by most other credit cards (nine months versus the typical six months), giving you more time to pay down any outstanding debt.
When you make purchases with the BMO Preferred Rate Mastercard, you’re covered by free extended warranty which doubles the manufacturer’s warranty up to one year and purchase protection. You’ll also qualify for Zero Dollar Liability, which protects you from unauthorized purchases made with the credit card.
4. Scotiabank Value Visa
If you bank with Scotiabank already and are looking for a convenient and competitive low interest credit card, the Scotiabank Value Visa is a perfect choice. While this credit card does have some restrictions, for example, a minimum income requirement of $12,000 per year and a $29 annual fee, it also has a lot to offer. The Scotiabank Value Visa has a flat interest rate of 12.99% on purchases, cash advances and balance transfers. If you have a balance to transfer when you sign up for this credit card, you can take advantage of 0.99% interest for six months.
Why we like it:
We love that this credit card has the same interest rate for purchases, cash advances and balance transfers. You don’t need to worry about whether a cash advance will cost more than a purchase or a balance transfer – the rate is the same for everything. The card’s balance transfer offer is also among the strongest in Canada and won’t require any additional balance transfer fees.
The Scotiabank Value Visa has the same high level of customer support and fraud protection that you expect from all Scotiabank products, and it has a bonus perk – up to 25% off AVIS car rentals, perfect if you travel frequently.
5. National Bank Syncro Mastercard
The National Bank Syncro Mastercard operates a little differently from the other low interest credit cards mentioned higher on this list. As opposed to having a fixed interest rate, this card has a variable APR that is determined based on your credit score in combination with the following calculation: Prime rate + 4% (minimum of 8.90%) for purchases and prime rate + 8% (or a minimum of 12.90%) for balance transfers.
Depending on your credit score and the current prime rate, the card’s interest rate generally hovers between 8.90% and 10.90% for purchases. However, it can’t be stated enough that the interest rate does vary on a case-by-case basis.
Why we like it:
If you have a good credit score, this card could be a great low interest option by letting you secure a rock-bottom rate of 8.90% on purchases and 12.90% on balance transfers. Even if you don’t have a credit score in the good to great range, the National Bank Syncro Mastercard can still help you secure an interest rate that’s well below what typical rewards credit cards charge.
As a low interest credit card, the National Bank Syncro Mastercard doesn’t offer much in terms of perks. But it does provide purchase protection, extended warranty, and access to the Priceless Cities program that allows cardholders to take advantage of curated dining and travel experiences.
6. Home Trust Secured Annual Fee Visa
The Home Trust Secured Annual Fee Visa Card is a secured credit card, which means it’s extremely easy to get but requires a security deposit equal to the credit limit of the card. For example, if you applied for the credit card with a $2,000 credit limit, you would need to put down a deposit of $2,000. You can use it just like a regular credit card, and the purchase interest rate is 14.90% – not the lowest on this list by any means, but still five percentage points lower than standard credit cards. There is an annual fee of $59 for this credit card, and it’s not available to residents of Quebec.
Why we like it:
This credit card is great for anyone with bad credit or with no credit score at all. You can apply for this credit card and use it to build up your credit before you graduate to an unsecured credit card. You can apply for this credit card if you have been discharged from bankruptcy or if you are in Consumer Proposal.
Some secured credit cards have limited uses, but you can use the HomeTrust Secured Annual Fee Visa Card just like a regular credit card, including making purchases online, over the phone, and at 24 million locations across the globe.
Low interest rate credit card – honourable mentions
TD Emerald Flex Rate Visa Card
- Annual fee: $25 (waived for the first year)
- Variable interest rate: Prime Rate + 4.50% or Prime Rate + 12.75%
- Extended warranty, purchase protection, and Visa Zero Liability protection
Similar to the aforementioned National Bank Syncro Card, the TD Emerald Visa has what’s known as a variable interest rate. Simply put, its interest rate isn’t fixed and will change depending on the Prime Rate and your creditworthiness according to the following calculations: Prime Rate + 4.50% or Prime Rate + 12.75%.
Since the current prime rate is 3.95% according to TD, that means, if you have an excellent credit score, you could land a rock-bottom purchase interest rate of just 8.45% (prime rate of 3.95% + 4.50%).
On the other end of the spectrum, if you don’t have the best credit history, you could end up with an interest rate of 16.7% (prime rate of 3.95% + 12.75%), which isn’t exactly the lowest on this list. Another slight downside, this card doesn’t come with a promotional balance transfer rate, so you won’t save much when consolidating your other card balances onto the TD Emerald Visa.
In terms of perks and features, there’s plenty to like. This card comes with Visa Zero Liability protection, so you’ll be covered in the event someone else uses your card to make a purchase you didn’t authorize. Additionally, cardholders will get purchase and extended warranty protection. You can also snag up to 10% off the base rate on rental car bookings at eligible Avis and Budget locations when using this card.
No Fee Scotiabank Value Visa
If you’re on the lookout for a low interest card with no annual fee but want to stick to using one of Canada’s big banks, then you’ll want to consider the No-Fee Scotiabank Value Visa.
At 16.99%, its interest rate clearly isn’t the lowest, but it is considerably below the industry average of 19.99%. Plus, its 16.99% rate also applies to cash advances and balance transfers, so you won’t have to factor for different interest rates for different types of transactions. The card also comes with discounts of up to 25% on rental car booking at eligible AVIS locations. All this combined with the fact that this card has a $0 annual fee, and you could stand to save a considerable amount. Similar to many other low interest cards though, the No-Fee Scotiabank Value Visa doesn’t really come with any bells and whistles, like travel insurance for instance.
Credit card interest – glossary of terms
- APR stands for “Annual Percentage Rate”, and it’s what banks use to calculate the amount of interest you owe on a credit card. Interest is shown in annual terms as a yardstick measurement – similar to how kilometres per hour is used to calculate a car’s speed – and the actual interest someone owes will vary depending on how long they owe a balance. For instance, if your card has a 19.99% APR but you carry a balance for just one month, your effective interest rate would be closer to 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: When you think of credit card interest, this is the rate you probably have in mind.
It’s the rate you’ll be charged on regular purchases you make on your credit card (think groceries, clothes, and everything in between). The purchase interest rate will be charged when – and only if – you carry a balance, so it’s a non-factor so long as you pay off your credit card bill in full and on time every month by the due date shown on your statement. That’s thanks to a 21-day interest free grace period between monthly billing cycles. If you don’t pay off your balance in full, however, this grace period is lost and interest will be applied to your purchases as you make them.
- Balance Transfer Interest Rate: This is the rate you’d owe on a balance you move from one credit card to another. Unlike the purchase interest rate covered above, this rate doesn’t come with the benefit of an interest free grace period and you’ll start accumulating interest on your transferred balance immediately.
The balance transfer rate on a credit card is usually the same as its purchase interest rate (i.e. 19.99% APR on rewards credit cards), but sometimes it’s higher.
- Balance Transfer Offer / Introductory Rates: We can’t talk about balance transfers without covering balance transfer offers.
Many credit cards come with special offers that dramatically reduce the balance transfer interest rate for a limited time. These offers can be as low as 1.99% APR to 0%, and last anywhere from six to twelve months. These offers can help you pay off old credit card balances for much less and transition your move 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. This rate has no grace period and interest will be charged daily from the moment you take out the cash until you pay back what you owe completely.
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%.
- Fixed vs Variable Rates: This one is kind of obvious – a fixed interest rate doesn’t change while a variable rate does. Variable rates are usually determined based on two factors: 1. A 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.
The benefit of a fixed rate is you know what you’re getting and it’s consistent while a variable rate can often help you get an even lower rate (provided you have a good credit standing of course).
How much you can save with a low interest card
Seeing that a credit card has a low APR might not make it immediately clear just how much you could stand to save. After all, when it comes to credit card bills, you don’t deal with percentages but real dollars.
With that in mind, we’ve run through a real-world scenario using two different credit cards: The first is a typical rewards credit card and the other is the MBNA True Line Gold, which Ratehub has ranked as the best low interest credit card 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
|Typical Rewards Card||MBNA TrueLine Gold|
|Months until your balance is paid||18||16|
|Total interest owed||$480||$194|
This makes it abundantly clear just how much a low interest credit card can help your bottom line. You’d save $286 in interest and pay off your balance two months faster with the MBNA True Line Gold compared to a typical rewards credit card.
How is credit card interest calculated?
As we’ve covered earlier, the term APR stands for Annual Percentage Rate and it’s effectively hows banks 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, but in reality, while interest is expressed annually it’s actually calculated daily. Confused? Let’s explain.
- If Credit Card X has a 15.99% APR, you’d owe interest daily at a rate of 0.0438% (15.99% ÷ 365)
- To find a credit card’s daily interest rate, simply divide its APR by the number of days in the year.
Sticking with the sample example, let’s say you owe a $3,000 balance on Credit Card X:
- Your daily interest rate would be 0.0438% (15.99% APR ÷ 365 days in the year)
- You’d owe $1.3142 in interest after one day (0.0438% x $3,000); and
- Your total balance would increase to $3,001.3142 after one day ($1.3142 in daily interest + your original $3,000 balance).
- The next day, your new balance of $3,001.3142 would also be charged 0.0438% – increasing your balance on day two to $3,002.69.
There are two key takeaways regarding how credit card interest works: First, it’s calculated daily, and second, interest compounds and you’ll be charged interest on top of interest. So, while a few dollars extra in interest from one day to the next might not seem like much, over time, it can quickly balloon. Especially if you keep making new purchases on your credit card.
Remember though, 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.
On the topic of rewards
If you can’t regularly pay off your credit card in full, there’s really no point in chasing points or cash back on a rewards credit card. That’s because most rewards credit cards have an Annual Percentage Rate of 19.99%, and the interest you’d rack up would devalue any rewards you earn.
Simply put: A rewards credit card is only worth it if you pay off your statement in full each and every month.
While almost all low interest credit cards don’t offer rewards, the fact they charge a fraction of the interest of a rewards card will help you come out ahead financially when you do carry a balance.
How to avoid credit card interest
The best strategy is to pay off your credit card balance in full and on time by the due date shown on your monthly statement. When you don’t pay off your balance in full, it’s the equivalent of borrowing money, and only then will you owe interest.
How to reduce credit card interest
If you’re looking to save on credit card interest but paying off your balance in full every month isn’t exactly on the table, consider adopting some of these strategies:
- The first step is obvious: Avoid making purchases on credit cards that carry a conventional 19.99% annual interest rate and use a low interest credit card as your primary piece of plastic.
- Use your credit card selectively. While paying with credit may be convenient, if you regularly carry a balance, consider sticking to debit or cash for the majority of your purchases and only using credit when it’s absolutely necessary. That way, you can avoid building up a bigger balance and owing even more interest.
- Always pay more than the minimum payment. Usually, at least $10 or 3% of your balance owing – paying just the minimum every statement period may seem like the easy option but it’ll hurt your bottom line over time. Paying just a few dozen dollars extra per month on top of the minimum payment can save you hundreds in interest over the long term and help you chip away at your balance months faster.
- Automate your credit card payments – it’s one of the best ways to ensure you avoid accidentally missing a credit card payment and can help establish a low effort and consistent debt repayment strategy. Better yet, consider scheduling these payments on the day you’re paid so a portion of your paycheck goes straight towards your balance before you have a chance to spend it elsewhere while still leaving enough for important fixed costs like rent.
- Use proven strategies (debt avalanche or debt snowball): If you owe multiple debts aside from just your credit card, consider one of these two popular debt repayment strategies. The idea behind the Debt Avalanche method is to spend most of your money paying off the debt with the highest interest rate and just meeting the minimum payments on everything else. The Debt Snowball method advocates for paying off your smallest debt first (regardless of the interest rate), and with each small win, keeping you motivated to tackle your next debt.
- Take advantage of balance transfer offers. If you owe a large balance on your existing credit card, you can move your debt over to a low interest card that comes with a “balance transfer offer” and pay it off much faster. For example, the MBNA TrueLine Mastercard has a balance transfer offer of 0% for 12 months – so you can transfer your old balances onto this card and pay nothing in interest for a whole year.
Depending on the card, you may have to pay an additional upfront transfer fee (usually 3% of your balance or less) but this small flat fee will pale in comparison to the interest you’d owe if you kept your balance on the old card. One final note: Remember that balance transfer offers don’t last forever, and after the promotional period ends, the balance transfer rate will revert back to its original interest rate.
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