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2021's Best Low Interest Credit Cards for Canadians

Are you carrying a credit card balance month-to-month? Find the lowest interest rate credit cards and make your balance more manageable.

What are low interest credit cards?

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%.

HSBC +Rewards Mastercard

HSBC +Rewards™ Mastercard®

card image
Welcome bonus
$100
HSBC Rewards Points
Annual rewards
$144
HSBC Rewards Points
Annual fee
$25

Best Credit Card for Paying Down Your Balance
A rare low interest card earns you rewards redeemable on travel or financial statements
Details at a glance Collapse details
Welcome bonus
$100
Annual rewards
$144
Best Credit Card for Paying Down Your Balance
A rare low interest card earns you rewards redeemable on travel or financial statements
Details at a glance Collapse details

The HSBC +Rewards™ Mastercard® offers cardholders an annual interest rate of 11.9% on purchases, balance transfers and cash advances for a low annual fee of $25 per year. Not only that, but this card also offers HSBC Rewards points and price protection. For a limited time, cardholders can earn 20,000 bonus points when they spend at least $2,000 in the first 180 days of opening the account. Plus, HSBC will rebate the $25 annual fee for the first year.

According to our Best of Finance methodology, the average Canadian will see $219 in HSBC Rewards points within the first year.

Credit score requirement for approval:

Fair: You’ve had a credit card or loan for one or more years. For the last two years, you’ve paid back debts to creditors (with no defaults). You haven’t missed more than two payments on your credit in the last three months.

Annual fee:

$25

Supplementary cards have an annual fee of $10.

Limited time offer/bonus:

  • Earn 20,000 points when you spend at least $2,000 on your card within the first 180 days of opening the account. Plus, HSBC will rebate the $25 annual fee for the first year.

Offer expiry date: September 27, 2021

Rewards:

  • Earn two points per dollar you spend on eligible dining or entertainment purchases.
  • Earn one point per dollar you spend everywhere else you shop.

Earning potential:

How does this card stack up to other rewards credit cards? We crunched the numbers using our Best of Finance methodology to see how much an average Canadian could earn over a 12-month period.

Rewards earned over a 12-month period = 48,800 points
Monetary value= $219
Annual fee = $0*
Total earned over the first year (rewards minus annual fee) = $219

*The primary cardholder receives a rebate for the $25 annual fee for the first year.

First-year savings:

We compared a credit card with a $2,000 balance and a standard interest rate of 19.99% to the HSBC +Rewards Mastercard with an interest rate of 11.90%. The average Canadian could save roughly $161.80 in interest charges with this low-interest credit card.

Credit card balance = $2,000
19.99% interest rate = $399.80
11.90% interest rate = $238.00
First-year savings (what you would be paying on a standard credit card – what you would be paying on a low-interest credit card) = $161.80

*The annual fee is accounted for in the rewards calculation.

You can redeem your points for:

  • Travel
  • Experiences
  • Merchandise
  • Gift cards
  • HSBC Savings account credit
  • HSBC Mortgage account credit
  • Statement credit

Insurance:

  • Purchase assurance
  • Extended warranty
  • Price protection
  • Travel and medical insurance (optional)

Other perks:

  • Take advantage of the low interest rate on purchases, cash advances and balance transfers.

*Rates, product information, and rewards estimates are subject to change at any time and do not constitute financial advice.

How will a low interest credit card help me save money?

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:

  • You owe a $1500 balance on your credit card
  • Every month, you choose to pay $150 towards your credit card statement
Example of how a low interest credit card can help you save money
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

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.

Is a low interest credit card right for you? Here’s what you need to know

What are the most common features of low interest credit cards?

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.

When is the best time to use a low interest credit card?

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.

What is the difference between fixed rate and variable rate credit cards?

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.

  • Fixed rate credit cards - The benefit of fixed rate credit cards is that you’ll know what interest rate you’ll be charged every billing cycle. The rate of interest won’t be affected by the bank’s prime rate or your creditworthiness. Fixed rate credit cards usually come with limited-time balance transfer promotions you can use pay off your existing credit card debt.
  • Variable rate credit cards - The advantage of holding a variable rate credit card is that you can get a very low rate (even lower than a fixed rate card in some cases), but this usually only comes with excellent credit. The disadvantage is that you might be stuck with a higher rate if your credit score isn’t great or if the bank’s prime rate increases.

If you have a credit score lower than 670, stick to a fixed rate, low interest credit card.

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