Credit Card Facts and Misconceptions

Most of us have one. Many of us could own several — dozens even — if we said yes every time we were offered one. Credit cards are a ubiquitous part of our consumer culture, yet we may not know all the dark little secrets these plastic cards hold.

Here are some interesting facts on credit cards that you may not know about:

Credit Card Fact #1: You are not Charged Interest on Purchases Right Away.

You have until the due date of your credit card statement to pay off the full amount before the interest will kick in (know as the Grace period). However, this is not the case for cash advances (including those so-called convenience cheques) and balance transfers. You are charged interest on these from the day you use them.

Credit Card Fact #2: They WANT you to Only Pay the Minimum Payment!

If you only pay the minimum amount owing on your credit card statement each month (usually about 2% of your outstanding balance), your interest will rack up very quickly – making the credit card companies very happy.  Your total debt will grow exponentially and before you know it you’ll be buried.   Don’t get burned by the ‘Minimum Payment’ number on your statement.

Credit Card Fact #3: The Grace Period is Void When You Don’t Pay.

If you don’t pay off your debt in full, you’ll notice the interest charges start to pile up quickly.  That’s because as you start to carry a balance, the grace period is void (on most credit cards), meaning the credit card company will start charging interest on purchases dating back to the day you bought them. That interest charge will only stop when you make a payment to cover that item in full.

Credit Card Fact #4: Your Interest Rates Vary.

Read your credit card agreement and statements carefully. You are probably being charge different interest rates, depending on how you use your card. Purchases are often charged at the lowest rate, but many companies will increase the rates for cash advances and balance transfers.

Credit Card Fact #5: Deals Don’t Last Forever.

If you get a brand new card, it may come with a tantalizingly low interest rate or a great reward return rate.  But for the most part, these offers are temporary.  Read the fine print to make sure you’re not signing up for a great introductory offer that will turn into a sour deal in a few months.

Reward Return Rate: Are all rewards created equal? From points, to miles, to cash back - how do you know how much you’re really getting? That’s why we’ve created the Reward Return Rate - a rate that lets you know the rate of return from your spending into rewards so that you can compare like for like.

Credit Card Fact #6: Issuers Want to Make Money!

No surprise here. Credit card companies do not operate to help you live better. They want to make a profit and compete with other companies. To stay out of debt and avoid sky-high interest rates, you’ve got to advocate for yourself and know what kind of credit really works for you.


The RATESDOTCA editorial team are experienced writers focused on sharing stories and bringing you the latest news in insurance and personal finance. Our goal is to provide Canadians with the information and resources they need to make better insurance and financial decisions.

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