Why a Credit Card Should Have the Lowest Interest Rate Available

by Barry Choi July 12, 2017 / No Comments

For years, Canadians have been living with all-time low interest rates. The Bank of Canada announces changes to its benchmark interest rate eight times a year, yet hasn’t moved it from 0.5% since July 2015. Sure, we keep hearing warnings about rates going up, but this only applies to people who currently have (or plan on getting) a mortgage.

Not everyone in Canada has a mortgage, but what most people do have is a credit card. Unlike mortgage rates, credit card interest rates can be quite high: for the typical rewards credit card, it’s 19.99%. You’ll pay quite the premium in interest charges if you carry a balance, but did you know it’s possible that credit cards could have the lowest interest rate available? Let’s take a look.

Low interest credit cards

As the name implies, the best low interest credit cards offer much lower interest rates, usually 8-15% vs. 19.99%. Obviously, in an ideal situation you’ll never carry a balance on your credit cards, but if you do, a low interest credit card will minimize the carrying costs to you every month. Here are two of the most popular low interest credit cards and the benefits that they offer.

American Express Essential Credit Card


  • No annual fee
  • Low interest rate of 8.99% on purchases, cash advances, and balance transfers
  • For new cardholders: special 1.99% introductory interest rate on balance transfers for the first 6 months (available only at time of online application)
  • Access to American Express Invites

With an interest rate of 8.99%, the American Express Essential Credit Card is very popular since it has one of the lowest interest rates currently available on the market. In addition, you can get a balance transfer rate of 1.99% interest for the first six months, so you can use this card as a way to reduce your debt. You’ll also get access to American Express Invites and 24/7 customer service.

BMO Preferred Rate MasterCard


  • Annual fee: $20
  • Low interest rate of 11.9% on purchases, cash advances, and balance transfers
  • Zero dollar liability, plus free purchase protection and extended warranty

With worldwide acceptance at over 30 million locations, the BMO Preferred Rate MasterCard is another popular low interest credit card. The interest rate is 11.9% and there is a $20 annual fee, but many people still like this card since they get free extended warranty and purchase protection as well as zero dollar liability protection.

Neither of these cards have the generous bonuses offered by the best travel rewards credit cards, but you need to think about your spending habits. What good is earning travel rewards when you’re paying interest every month for them?

A travel rewards credit card typically has an interest rate of 19.99%, so when you compare that to a low interest credit card, you’re paying on average 8% to earn those rewards if you carry a balance. A negative return makes no sense.

Personal loans or unsecured line of credit aren’t always the answer

If you’re trying to get access to credit, you may sometimes to consider alternative options before thinking about your credit card. If your credit is in good standing, then getting a loan with a low rate is possible, but that’s not always the case. You might sometimes be surprised at the terms lenders offer you.

Unsecured lines of credit

Many banks offer unsecured lines of credit to their customers, but the rate you get depends how high your credit score is. Usually it’s a percentage, plus the bank’s current prime rate. So let’s say you’re offered a rate of 7%, plus the average prime rate of 2.7%, for a total of 9.7%; that’s higher than what you can get with some low interest credit cards.

Payday lenders

You should never use a payday lender. Despite what their advertisements may tell you, it’s never a good deal to borrow from them. It’s a bit complicated to go over how their math works, but payday loan charges can be the equivalent of a 500% annual interest rate, according to the Financial Consumer Agency of Canada. That’s not a typo — payday lenders charge ridiculously high amounts of interest and should never be considered.

The bottom line

Remember, carrying a balance should be avoided. But if you must, use a low interest credit card to minimize the amount of interest you pay. Make it a goal to pay off your debts as soon as you can, try not to reply on your credit cards as a way to access money fast.

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