For years, Canadians have lived with low interest rates. The Bank of Canada announces changes to its benchmark interest rate eight times a year, but has not moved it 0.5% since July 2015. Of course, we continue to hear warnings about an increase in rates, but this only applies to people who have a mortgage (or are preparing to have one).
Not everyone in Canada has a mortgage, but what most people have is a credit card. Unlike mortgage rates, credit card interest rates can be quite high: for the typical credit card, it’s 19.99%. You will pay a big bonus premium in interest charges if you carry a balance, but did you know that it is possible that credit cards may have the lowest interest rate available? We will take a look at this.
Low interest credit cards
As its name suggests, the best low interest rate credit cards offer much lower interest rates, usually 8 to 15% versus 19.99%. Of course, in an ideal situation, you would never have a credit card balance, but if you did, a low interest credit card would reduce the monthly shipping charge. Here are two of the most popular low interest rate credit cards and the benefits they offer.
Personal loans or unsecured line of credit are not always the answer
If you are trying to access credit, you can sometimes consider other options before thinking about your credit card. If your credit is in good standing, it is possible to get a low rate loan, but this is not always the case. You may sometimes be surprised by the terms lenders will offer you.
Unsecured lines of credit
Many banks offer unsecured lines of credit to their customers, but the rate you get depends on the size of your credit rating. Usually, it is a percentage plus the current prime rate of the bank. Let’s say we offer you a rate of 7%, plus the average prime rate of 2.7%, for a total of 9.7%; This is higher than what you can get with low interest credit cards.
You should never use a payday lender. Despite what their ads will tell you, it’s never a good deal to borrow from them. It’s a bit complicated to see how their math works, but payday loan fees can be as high as 500% per year, according to the Financial Consumer Agency of Canada. This is not a typo – payday lenders charge ridiculously high interest amounts and should never be taken into consideration.
Remember, carrying a balance should be avoided. But if you need, use a low interest credit card to minimize the amount of interest you pay. Make it a goal to pay off your debts as soon as you can, try not to rely on your credit cards as a quick way to access the money.