The standard purchase interest rate for most credit cards listed in Canada is 19.99% or 20.99%. The average is between 19.99% and 25.99%.
The Bank of Canada monitors the average interest rates Canadian consumers pay on various financial products, including credit cards. According to the Bank of Canada, the average credit card interest rate on outstanding balances in Canada was 20.50% as of May 2024.
Of course, the annual percentage rate (APR) you pay on your credit card may not reflect the national average. APRs for credit cards vary widely depending on the type of card. If you make a late payment, you may be charged a higher interest rate than the interest rate listed on the issuer’s website. Additionally, if your credit card is a charge card, such as American Express, that requires you to pay off your balance in full each month, your interest rate may be different.
Average Credit Card Interest Rates by Credit Score
The higher your credit score, the more likely you are to qualify for a lower interest rate on credit cards, loans, and other types of financing. So a good credit score can save you money in many situations.
On the other hand, a low credit score means you’re a higher risk to credit card companies. This status tends to mean cardholders will have higher APRs. Credit cards with APRs of 25% to 30% are not uncommon.
Exact interest rates on credit cards vary from company to company and from individual cardholder to individual cardholder. The type of credit card you open can also affect your APR, with rewards credit cards often offering higher interest rates than other types of credit card products.
Below is an overview of the approximate APR ranges you can expect with general-purpose credit cards, depending on your credit score. Be sure to check with your credit card issuer to see what interest rates are being offered on any accounts you’re considering.
How Credit Card Interest Rates Affect You
When it comes to interest rates, it’s always best to lock in the lowest amount possible. On paper, the difference between a 23% APR and a 27% APR may not seem like much. But if you’re carrying a growing credit card balance, lowering your interest rate could save you thousands of dollars. Here’s an example:
Credit Card Interest Cost Comparison
As you can see above, credit card interest rates can also affect how long it takes you to pay off your credit card debt. The lower the APR, the faster you’ll pay off your debt, making it more affordable.
Of course, the best way to deal with credit cards is to pay off your balance in full every month. If you can get into this habit and avoid getting into credit card debt in the first place, the APR on your account shouldn’t have an impact on your budget. Paying off your account balance in full every month means you won’t have to pay credit card interest in full.
How to Lower Your Credit Card Interest Rate
If you’re working to pay off your credit card debt, lowering your interest rate can help you save money and pay off your debt faster. Here are some strategies you can try to lower your credit card APR.
Balance Transfer. You may be able to open a new credit card and take advantage of a low-interest balance transfer offer. A balance transfer credit card’s low introductory interest rate won’t last forever (usually for 6-12 months). However, if you can afford to aggressively reduce your debt while the introductory APR is in effect, you may be able to significantly reduce your credit card debt or even pay it off completely.
Our balance transfer calculator can help you increase your potential savings by factoring in balance transfer fees, introductory interest rates, and more. We also recommend comparing multiple balance transfer credit card offers to ensure you find the best deal that best suits your situation. Keep in mind that you usually need good to excellent credit to qualify.
Consolidation loans. Another way to reduce existing credit card debt is to pay it off with a consolidation loan. Depending on your credit score, debt-to-income ratio (DTI), and other factors, you may be able to get a new personal loan with a lower interest rate than you would pay on your credit card accounts. Taking out a low-interest consolidation loan can save you money and speed up the process of getting rid of your debt. Plus, consolidating your revolving credit card debt with an installment loan can lower your credit card utilization rate and improve your credit score at the same time.
Contact your credit card issuer. Credit card APRs aren’t fixed. Therefore, you can ask your credit card issuer if they can lower your credit card interest rate. In some cases, they may.
If you see a credit card offer with a low interest rate that you’re considering, tell your card issuer. A history of on-time payment on your accounts and a good credit score may also work in your favor when applying.
How to Improve Your Credit Score
Whether you’re looking to get a lower interest rate on a new credit card or keep your APR low on an existing account, having good credit can be an advantage. With a good credit score, you’re more likely to qualify for new accounts and take advantage of the best rates and terms offered by credit card companies.
In fact, going from poor or average credit to good credit can take time. But there are steps you can take to improve your credit score right away.
- Check your credit report. If you want to improve your credit score, it’s important to know where you stand. The good news is that Canadians are required by law to review their credit reports from both major credit bureaus (Equifax and TransUnion) once a year. Visit Equifax and Transunion’s consumer information pages to request a free credit report from each credit bureau annually.
- Make note of derogatory credit information. Once you have your credit report, review it from top to bottom. Write down any negative information you find that could affect your credit score. You may not be able to do anything about these issues until they finally disappear from your credit report, but you can be careful not to make the same mistakes again.
- Pay off your credit card balances. Reducing your credit card balances and lowering your credit utilization ratio are one of the most effective ways to improve your credit score. Credit utilization is an important factor in creditworthiness and accounts for 30% of your credit score. If you have a low credit utilization ratio, you are a poor credit risk.
- Dispute credit errors. As you review your credit report, list any credit report errors or signs of fraud that you discover. You can dispute inaccurate information on your credit report with the appropriate credit reporting agency (Equifax or TransUnion) and request that it be removed or corrected.
- Show a positive payment history. Paying your credit debts on time or late is the most important factor in determining your FICO score. Avoiding late payments can help you win in terms of your credit score. But even just the occasional late payment on your credit report can be a major setback.
- Consider opening a new account. If you have poor credit or need to build credit for the first time, you may benefit from opening a new credit account. Without a credit history, it may be difficult to qualify for certain loans or credit cards. However, options such as secured credit cards and credit-building loans may work well as long as you always pay on time. You may also consider having a loved one add you as an authorized user on their existing credit card accounts.
- Keep up to date on utility and rent payments. In Canada, utility and rent payments typically don’t count towards your credit score, but late payments will appear on your credit report and negatively impact your score. Additionally, in April 2024, the Canadian government proposed to count rent payments towards your credit score to level the playing field for homeowners. So, utility bills and rent may appear on your credit report in the future.
Bottom Line
Improving your credit score can help you qualify for attractive credit card interest rates. But don’t be discouraged if you need to improve your credit score before you can qualify for the best deals. As long as you pay your balance in full each month, you can enjoy the many benefits that credit cards offer without paying interest, regardless of your credit card account’s current APR.