Best Credit Card for Paying Down Your Balance in Canada for 2020

Credit card interest is costing you money—plain and simple. If you find yourself carrying a balance month-over-month, it may be time to devise a plan and conquer your debt.

According to Statistics Canada, for every dollar of disposable income a Canadian household has, they owe $1.77 in credit market debt.

Carrying a balance on a credit card that has 19.99% interest is not helping. Although the welcome offers and rewards can be alluring, paying lots of credit card interest is not.

Switching to a low-interest credit card may help in two ways:

• Balance transfer: Promotional interest rates on balance transfers may provide ultra-low rates, sometimes as low as 0%. The offer usually extends to several months, giving you plenty of time to pay down your balance without incurring high-interest charges. It is important to note, new purchases generally have standard interest rates, and if you miss a payment, you may forfeit the offer. However, if used responsibly, cardholders can use balance transfers to their advantage.
• Low-interest rates: Some credit cards provide low-interest rates on purchases for a limited time, while others offer low rates all year long.

A low-interest card that offers a balance transfer may pack double the punch to help you reduce your debt and save on interest charges.

We compared low-interest credit cards in Canada using our Best of Finance methodology and ranked the cards that provided the most savings. Surprisingly, our top credit card in this category also offers rewards!

These are the best credit cards for paying down your balance for 2020.

1. HSBC +Rewards™ Mastercard^®

The HSBC +Rewards™ Mastercard^® offers cardholders an annual interest rate of 11.9% on purchases, balances 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.

According to our Best of Finance methodology, the average Canadian will see $244 in HSBC Rewards points within the first year. Not only that, but this card also has a low-interest rate and would save the average Canadian $161.80 in interest charges over the first 12 months. That makes the first-year value for this credit card roughly $405.80.

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:

• 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. That is a $100 travel value. HSBC will also rebate the annual fee for the primary cardholder for the first year.

Offer expiry date: December 28, 2020

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 HSBC Rewards points
Monetary value= $244
Annual fee = $0
Total earned over the first year (rewards minus annual fee) = $244

*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.

2. Modulo Visa credit card from Desjardins

*This card is no longer available. Compare low-interest credit cards on the RATESDOTCA credit card marketplace to find your match.

The Modulo Visa credit card from Desjardins features a 10.90% interest rate and offers cardholders 1% BONUSDOLLARS back on purchases. Not only that, but this card also provides mobile device insurance and travel coverage for up to three days.

According to our Best of Finance methodology, the average Canadian will see $190 in BONUSDOLLARS within the first year. Additionally, with the low-interest rate of 10.90%, the average Canadian will save roughly $180 in interest charges in the first 12-months. That means the first-year value of this card is around $370.

Although this card has the highest value, we feel the $50 annual fee outweighs the variance in savings.

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:

$50

Limited time offer/bonus:

• No welcome bonus at this time

Rewards:

• Get 1% of your purchases back in BONUSDOLLARS.

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 = $240 BONUSDOLLARS
Annual fee = $50
Total earned over the first year (rewards minus annual fee) = $190

First-year savings:

We compared a credit card with a $2,000 balance and a standard interest rate of 19.99% to the Modulo Visa credit card with an interest rate of 10.90%. The average Canadian could save roughly $180 in interest charges with this low-interest credit card.

Credit card balance = $2,000
19.99% interest rate = $399.80
10.90% interest rate = $219.80
First-year savings (what you would be paying on a standard credit card – what you would be paying on a low-interest credit card) = $180

*The $50 annual fee has been subtracted from the value of the rewards.

You can redeem your points for:

• Travel
• Financial products and services
• Donations
• Merchandise
• Gift cards
• Events
• Statement credit

Insurance:

• Mobile device insurance (cellphone, tablet)
• Travel coverage for three days
  • Emergency health care coverage
  • Trip cancellation
  • Baggage
• Purchase protection
• Extended warranty

Rates, product information, and rewards estimates are subject to change at any time and do not constitute financial advice. Information in this article is accurate as of the date of this posting, November 5, 2020. This article was first published on August 19, 2020.

This post has been updated.

Related reads:

• Best of Finance Winners: The Best Credit Cards for 2020 
• Best Rewards Credit Card in Canada for 2020
• Best No-Fee Credit Card in Canada for 2020
• Best Travel Credit Card in Canada for 2020
• Best Cash Back Credit Card in Canada for 2020
• Best Premium Perks Credit Card in Canada for 2020
• Best Credit Card for Rebuilding Credit in Canada for 2020
• Best Credit Card for Young Professionals in Canada for 2020
• Best Credit Card for Students in Canada for 2020
• Best Credit Card for Frequent Flyers in Canada for 2020
• Best Credit Card for Snowbirds or Cross-Border Shoppers in Canada for 2020
• Best Credit Card for Newcomers to Canada for 2020
• Best Credit Card for Families in Canada for 2020