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If you tend to carry a credit card balance from month to month, having a low interest credit card will help you save money on interest charges. The standard credit card interest rate is 19.99 to 20.99%, a high-interest rate for a recurring credit card balance. Having a high-interest credit card means you’re paying a lot of extra money on interest, money you could save if you switched to a low annual interest rate credit card. As their name indicates, low-interest credit cards come with much lower interest rates, sometimes as low as 4.99%.
The best way to avoid paying costly interest charges is to pay off your credit card balance in full at the end of each statement period. However, that is not always possible, and there might be times when you carry a balance. If this does happen, interest will start to accrue on the unpaid balance at a set annual rate that compounds daily.
Most credit cards charge a standard annual interest rate of around 19.99% on purchases, which can add up quickly.
Although the welcome offers and perks of some credit cards can be enticing, mounting interest charges caused by carrying a balance will outweigh any advantages. Switching to a low interest credit card may offer cardholders the opportunity to tackle their debt faster and pay less interest. This decision can put cardholders in a healthier financial position in the future.
We compared low interest credit cards in Canada using our Best of Finance methodology and ranked the cards that provided the most potential savings. The average savings have been calculated against a monthly spending of $2k using a standard interest rate credit.
Click the card name from the table below to learn more.
| First year savings | Annual fee | Interest rate (purchases) | |
|---|---|---|---|
| $181 | $39 | 8.99% | |
|
Runner up |
$162 | $25 | 11.9% |
|
Runner up |
$305 | $29 (First year waived) | 13.99% |
For an annual fee of $39, the True Line® Gold Mastercard® offers cardholders an 8.99% standard annual interest rate on balance transfers and purchases, allowing you to quickly pay down any outstanding credit card balances. This card also includes complimentary shopping insurance.
To determine the average savings a consumer could expect with the True Line® Gold Mastercard®, we looked at the amount they would save in interest charges on an outstanding balance of $2,000.
Most credit cards charge an annual interest rate of 19.99% as compared to the True Line® Gold Mastercard®''s 8.99%. Using our Best of Finance methodology, we found the True Line® Gold Mastercard® would save the average Canadian around $181 annually
Annual fee
$39
Interest rates
Benefits
Insurance coverage
The HSBC +Rewards™ Mastercard® provides cardholders with a rare combination of features — a low interest rate and rewards. For just $25 a year, cardholders can access an 11.9% interest rate on balance transfers, cash advances and purchases. Plus, earn two points for every $1 spent on eligible dining and entertainment purchases and one point for every $1 on all other purchases.
If a cardholder carried a balance of $2,000 on the card for a year, they would save $137 in interest with the HSBC +Rewards™ Mastercard® than if they carried the same balance on a card with a 19.99% interest rate (the standard rate for credit cards).
Annual fee
$25
Limited time offer/bonus
Offer expiry date: February 28, 2023
Interest rates
Rewards
The BMO Preferred Rate Mastercard* offers cardholders a standard annual interest rate of 13.99% on purchases and 15.99% on balance transfers— the lowest interest rate offered by BMO on any of its credit cards. Plus, for a limited time, get a 0.99% introductory interest rate on balance transfers for nine months with a 2% transfer fee.
If a cardholder carried a balance of $2,000 on the card for a year, they would save $120 in interest with the BMO Preferred Rate Mastercard* than if they carried the same balance on a card with a 19.99% interest rate (the standard rate for credit cards).
Annual fee
$29
Limited time offer/bonus
Offer expiry date: July 31, 2023
Interest rates
With a low interest credit card, you can pay off your credit card balance faster. This is because more of your monthly payment is being put towards your balance instead of the interest.
Standard credit cards come with an interest rate ranging from 19.99%-22.99%, while low interest cards can be as low as 4.99% to 15.99%.
Let’s see an example of how much interest you can save by switching to a low interest credit card.
Let’s say:
| Typical credit card | Low interest credit card | |
|---|---|---|
| Annual interest rate | 19.99% | 8.99% |
| Monthly interest rate | 1.67% | 0.74% |
| Months until your balance is paid in full | 12 | 11 |
| Total interest paid | $154.49 | $65.13 |
Is a low interest credit card right for you? Here’s what you need to know
Most low interest credit cards come with a no annual fee, and typically no rewards. This is because they are specifically designed to make it easier for you to pay your recurring credit balance. Most low interest credit cards do not offer perks though because the low interest rate itself is considered the perk.
The best time to use a low interest credit card is when you have a high recurring credit balance to pay off. While comparing low interest credit cards, look for a great promotional interest rate to take advantage of.
When you’re comparing low interest credit cards, you’ll notice that there are two types, fixed rate credit cards and variable rate credit cards.
A fixed rate low interest credit card has the same interest rate throughout the year, while the variable rate low interest credit card has a fluctuating interest rate. This variation depends on two important factors, one being the bank’s current prime rate and the second being your credit score. If you have a low credit score (below 600), you may not be able to take advantage of some of the interest rate discounts that come with the variable rate, low interest credit card.
If you have a credit score lower than 670, stick to a fixed rate, low interest credit card.
RATESDOTCA may receive compensation when you click on links to those products or services. However, our content and calculations are objective and free from bias. The opinions expressed are purely those of RATESDOTCA; thus, partners are not responsible for any editorials or reviews that may appear. For current terms and conditions on any advertiser or partner’s product, please visit their website.
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