Key takeaways
- Standard credit cards in Canada often charge about 20% a year or more on purchases: check your statement for your rate
- Minimum payments are often 3% of the balance or $10 plus interest; in Quebec the minimum is 5% since August 1, 2025
- Paying only the minimum can take many years and cost more than the original balance in interest
- A fixed payment you can keep up every month clears debt much faster
- Pay the full statement balance by the due date and you pay no interest on new purchases
How credit card interest works
Credit card interest is shown as a yearly rate, but it is charged on your daily balance and added each month. A 20.99% card costs about 1.75% a month. If you carry $4,000, that is about $70 of interest in the first month alone.
New purchases have an interest-free grace period if you pay your full statement balance by the due date. Once you carry a balance, interest is charged on purchases from the day you make them. Cash advances usually have no grace period and a higher rate.
Why minimum payments take so long
Card issuers set the minimum payment. The Financial Consumer Agency of Canada (FCAC) says it is usually a flat amount (often $10) plus interest and fees, or the higher of $10 and about 3% of your balance. Since August 1, 2025, the minimum for Quebec residents is 5%.
Because the minimum falls as your balance falls, you pay off less and less each month. FCAC’s own example: a $2,000 balance at 18% paid at $60 a month takes 3 years and 11 months and costs $793 in interest. Paying $160 a month clears it in 1 year and 2 months, with $231 of interest. Our calculator gives the same results.
Worked example
Kofi owes $4,000 on a card at 20.99%. If he pays only the minimum (3% of the balance, at least $10), it takes about 20 years and costs about $5,090 in interest. If he pays a fixed $200 a month, he is debt-free in 2 years and 1 month and pays about $970 in interest. He saves over $4,100.
Ways to pay it off faster
- Pay more than the minimum, every month. Set up an automatic fixed payment from your bank account.
- Stop adding new purchases to the card you are paying off. Use debit for daily spending until it is clear.
- Avalanche method: if you have several cards, pay extra on the highest rate first.
- Lower your rate: ask your bank about a low-rate card or a balance transfer offer. Read the fee and the rate after the promotion ends.
- Get free help: non-profit credit counselling agencies can set up a debt management plan.
Several cards? Which to pay first
Make the minimum payment on every card so you are never late. Then put every extra dollar on one card at a time:
- Avalanche: highest interest rate first. This costs the least interest.
- Snowball: smallest balance first. You close balances faster, which some people find motivating.
Run each card through the calculator to see the interest at stake.
Newcomers: protect your new credit history
Your first Canadian card is how you build a credit score. Late or missed payments hurt your score the most, and carrying a high balance also counts against you. Always pay at least the minimum on time, and keep your balance low compared with your limit: see the credit utilization calculator.
New to credit? Read building credit from zero, compare credit cards for no credit history, and try the credit score builder.