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Nobody wants to pay interest on their unpaid credit card balances on top of all the purchases they've made. To get the most from your credit card, you should pay off your balance every month to avoid accruing interest. Still, mistakes can happen, or unexpected expenses can arise. Low interest credit cards can help you pay less interest should unforeseen circumstances occur. That peace of mind is nice, but like anything, there are always trade-offs. In the case of low interest cards, the compromise usually comes from a lack of rewards. That's where the HSBC +Rewards™ Mastercard® is unique.
With the HSBC +Rewards™ Mastercard®, you have the opportunity to '"have your cake and eat it too." It offers permanently low interest rates and flexible rewards for making everyday purchases on the card. Plus, earn an accelerated reward rate for every $1 spent on eligible dining and entertainment purchases.
Not only that, but the flexible points program also provides cardholders with travel and cash redemption options. Learn more about the HSBC +Rewards™ Mastercard® below or use RATESDOTCA's Credit Card Marketplace to compare low interest cards and see how they stack up.
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 average credit card interest rate is 19.99%, which is 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 be saving if you switched to a low annual interest rate credit card. Like their name indicated, 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 each statement period. However, that is not always possible, and sometimes, you may carry a balance month-over-month. In that case, interest would start to accrue on the unpaid balance at a set rate, compounded 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, the mounting interest charges can outweigh any advantages if you carry a balance. 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 for 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.
Click the card name from the table below to learn more.
| First year savings | Annual fee | Interest rate (purchases) | |
|---|---|---|---|
|
1. True Line® Gold Mastercard® credit card - WINNER |
$181 | $39 | 8.99% |
|
2. HSBC +Rewards™ Mastercard® Runner-up |
$137 | $25 | 11.9% |
|
3. BMO Preferred Rate Mastercard* - Runner-up |
$275 | $20 (First year waived) | 12.99% |
The True Line® Gold Mastercard® offers cardholders an 8.99% standard annual interest rate on balance transfers and purchases for an annual fee of $39.
According to our Best of Finance methodology, this low interest credit card would save the average Canadian around $181 in interest in the first year.
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.
According to our Best of Finance methodology, the average Canadian could save $137 in interest charges in the first year.
Annual fee:
$25
Limited time offer/bonus:
Offer expiry date: N/A
Rewards:
Interest rates:
The BMO Preferred Rate Mastercard* offers cardholders a standard annual interest rate of 12.99% on balance transfers and purchases — BMO’s lowest rate. Plus, for a limited time, get a 3.99% introductory interest rate on balance transfers for nine months with a 1% transfer fee.
According to our Best of Finance methodology, the average Canadian would save around $275 in interest charges in the first year.
Annual fee:
$20
Limited time offer/bonus:
Offer expiry date: October 31, 2021
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.
Over the time period it take to pay down the $1500, in $150 payments every month you will have been charged $154 in interest under a traditional credit card vs the $65 under the low interest credit card. When you choose the low interest credit card, you pay less in interest. In this example, you save $89.36 in total interest, which would help you to pay off your balance a month faster compared to using the standard rate credit card.
Disclaimer: This is a simplified example for illustrative purposes to help you understand how interest charges on credit cards may add up.
Rates, product information, and reward estimates are subject to change at any time and do not constitute financial advice. This post was not sponsored. The views and opinions expressed in this review are purely those of RATESDOTCA. Information in this article is accurate as of the date of this posting, May 18, 2021. Read our full disclaimer.
