How credit card interest works in Canada

Credit card interest in Canada is simpler than it looks. If you pay your full statement balance by the due date every month, you pay zero interest on purchases. Interest only kicks in when you carry a balance past the due date, and it is charged on a daily basis at your card's annual percentage rate (APR). This guide explains exactly how that calculation works, what the grace period covers, and where the rules come from.

Nothing here is financial advice. Always confirm the numbers on your own cardholder agreement before acting.

The grace period: how to pay zero interest

Federally regulated credit card issuers must give you an interest-free grace period of at least 21 days on new purchases. The clock runs from the end of your statement period to your payment due date. As long as you paid your previous statement balance in full, new purchases do not accrue interest during this window.

The catch: the grace period only applies to purchases, and only when you pay in full. The moment you carry a balance forward, you typically lose the grace period on new purchases too, so interest can start from the transaction date on everything until you are paid up again.

How the interest is actually calculated

When you do carry a balance, issuers calculate interest daily, not monthly. The standard method:

1. Convert your annual purchase APR to a daily rate by dividing by 365.
2. Multiply that daily rate by your balance for each day in the billing cycle.
3. Add up the daily charges across the cycle.

So a card with a 20.99 percent purchase APR has a daily rate of about 0.0575 percent. On a $1,000 balance carried for 30 days, that is roughly $17 in interest for the month, and it compounds as it is added to your balance.

Most Canadian cards land between roughly 19.99 and 22.99 percent for purchases, with low-interest cards closer to 10 to 13 percent. Cash advances and balance transfers usually carry a higher rate. Check your card's exact rates against the issuer's disclosure box.

Purchase APR vs cash advance APR vs balance transfer

Your card has more than one interest rate:

Transaction type	Grace period	Typical rate
Purchases	Yes (21+ days if paid in full)	~19.99–22.99%
Cash advances	No, accrues immediately	Often higher than purchases
Balance transfers	Usually none (unless a promo)	Varies, promo rates common

Cash advances are the expensive trap: no grace period plus a per-transaction fee plus a higher rate. Treat ATM withdrawals on a credit card as a last resort.

Where these rules come from

The grace period minimum, the required disclosure of rates, and how issuers must present the cost of borrowing are set out in Canada's Cost of Borrowing (Credit Cards) Regulations and explained in plain language by the Financial Consumer Agency of Canada (FCAC). Those primary sources are linked below.

How to never pay interest

• Pay the full statement balance by the due date, every month, to keep the grace period.
• Set up automatic full-balance payments so a missed date never costs you.
• If you already carry a balance, a low-interest card or a promotional balance transfer can cut the cost while you pay it down.
• Avoid cash advances; they bypass the grace period entirely.

If your goal is rewards rather than borrowing, only chase points on a card you pay in full, since a 20 percent interest charge wipes out any 1 to 5 percent in rewards. See our points valuation guide for how we compare reward value.