Credit Card Interest in Canada

How Credit Card Interest Is Calculated in Canada, One Statement at a Time

If you pay your statement balance in full by the due date, a Canadian credit card charges no interest on purchases. If you do not, interest runs from the date you made each purchase, and the usual arithmetic is a daily rate (the annual rate divided by 365) multiplied by each day's balance. On a $1,200 balance carried at 19%, with one more purchase, a payment and a cash advance in the cycle, a single 30-day statement comes to $22.16 of interest. The surprise for most people is not the rate. It is how one unpaid dollar switches off the grace period for everything else.

What the FCAC says about interest, in five facts

The Financial Consumer Agency of Canada's pages on how credit cards work and on paying off a card establish the rules this guide builds on.

• A minimum grace period. "Federally regulated financial institutions must provide a minimum 21-day grace period." It begins on the last day of your billing period. The FCAC's example: a smartphone bought on January 15 appears on the February 1 statement and can be paid by February 21 without interest.
• Interest from the purchase date if you do not pay in full. "If you don't pay your balance by the due date, you'll pay interest from the date you made the purchase."
• No grace on cash advances, cash-like transactions or balance transfers. For a cash advance, interest runs from the day you get it until it is repaid in full.
• Different rates for different transactions. The example is 19% on regular purchases and 22% on cash advances or cash-like transactions. Rates on specialized and retail cards may be higher.
• Payments go to the cheaper balance first. Typically the minimum payment applies to the portion of your balance with the lowest interest rate, and anything above it goes either to the highest-rate portion or across the whole balance proportionally.

Those two rates, 19% and 22%, are used in every example below.

The arithmetic of a daily rate

The rates, balances and dates in this guide are examples, and 19% and 22% are the FCAC's own example rates, not a statement about any card. The day-by-day arithmetic is a standard illustration rather than a description of any one issuer, and your cardholder agreement governs how your card calculates and compounds interest. Most of the work is one conversion. The daily rate is the annual rate divided by 365: =balance*rate/365 for a day, and times the number of days for a stretch.

The annual rate is a nominal rate. If interest is added to the balance each day and then charged interest in turn, the effective yearly cost is higher than 19%: about 20.92% with daily compounding, or about 20.75% if interest is added once a month. The 22% rate becomes about 24.60% with daily compounding or 24.36% with monthly. Your cardholder agreement says how often interest is added, so these figures show the size of the effect and not a statement about any particular card.

How long a short loan lasts also matters more than people expect. The interest on $1,000 at the FCAC's example rates after different holding periods:

Interest here is simple (no compounding within the period), so doubling the days doubles the cost. A week on a cash advance at 22% costs $4.22 per $1,000, which is why a quick cash advance feels cheap and is still never free.

Because the divisor is 365, the length of the cycle matters as well. A $5,000 balance carried at 19% costs $72.88 in a 28-day cycle, $78.08 in a 30-day cycle and $80.68 in a 31-day cycle. If your statement interest is a few dollars off your own calculation, count the days in the cycle before looking for a fee.

One statement, day by day

Consider a statement where last month's balance was not paid in full, so no grace period is in play. The cycle is 30 days:

Interest is the daily rate times the balance on each day. Group the days into stretches with the same balance:

Purchases: 36,200 balance-days × 19% ÷ 365 = $18.84. Cash advance: 5,500 balance-days × 22% ÷ 365 = $3.32. Total interest for the statement is $22.16.

Dividing the balance-days by the 30 days gives the average daily balance: $1,206.67 for purchases and $183.33 for the cash advance. Multiplying each by its annual rate and 30 ÷ 365 gives the same $22.16, which is why an issuer can describe the calculation either way (the average-daily-balance form is =SUMPRODUCT(balances, days)/SUM(days)*rate*cycle_days/365).

Two things to notice. The $400 payment on day 12 saves interest only from day 12 on: 19 days × $400 × 0.05205% = $3.96, not the whole month's interest on $400. Paying the same $400 on day 28 would have saved $0.62, and on day 5, $5.41. And the $500 cash advance cost $3.32 in 11 days, even though it was borrowed late in the cycle. The same $500 charged as a purchase and paid in full by the due date would have cost nothing.

How one missed payment removes the grace period

The grace period is all-or-nothing. If you pay the statement balance in full by the due date, you pay no interest on those purchases. If you pay less, the FCAC says you pay interest from the purchase date.

Take a $2,000 purchase made on day 3 of a 30-day cycle, with no other balance. The statement closes on day 30 and the grace period runs 21 days after that. Here are three outcomes at 19%:

The 49 days are 28 days in the cycle (day 3 through day 30) plus the 21 days of the grace window. The $2,000 × 0.05205% × 49 days = $51.01. For the $1,900 case the first figure assumes interest on the whole purchase from its date, as the FCAC describes; the $100 left behind then carries a balance of $151.01 (including the interest) into the next cycle. The $100 shortfall cost about $52.57 within the next two statements ($51.01 plus $1.56), and in the next cycle new purchases are no longer interest-free either, because there is a carried balance.

Paying 95% of the balance is not 95% of the benefit. Paying 100% costs nothing, and anything less loses the grace period on every purchase in that statement.

The length of the free loan also depends on when in the cycle you buy. With a 30-day cycle and the 21-day grace window, a purchase on day 1 has 29 days left in the cycle plus 21, which is 50 days before payment is due. A purchase on day 10 has 41 days, a purchase on day 20 has 31 days, and one on day 30 has 21. The pattern is why people time large purchases for just after a cycle closes, and it changes nothing if you will not pay in full, since in that case interest runs from the purchase date.

Cash advances and the other transactions with no grace period

A cash advance is the opposite case: there is no grace period at all. At the FCAC's example rate of 22%, a $500 advance repaid after 30 days costs 500 × 0.06027% × 30 = $9.04. The same $500 as a purchase paid in full by the due date costs nothing; carried at 19% for 30 days it would cost $7.81.

The FCAC page lists more transactions in the same category:

• Cash-like transactions: wire transfers, money orders, travellers' cheques and gaming transactions such as bets, casino chips and lottery tickets. Interest starts immediately, usually at a higher rate, and a fee may apply.
• Credit card cheques (also called convenience or promotional cheques): interest starts when you use them, usually at a higher rate.
• Balance transfers: usually carry a percentage fee, and the FCAC's example is a $1,000 transfer with a 3% fee, which costs $30. Interest still applies to the transferred amount, and promotional rates run for a set period.

Fees for cash advances can be a fixed amount, a percentage or both, sometimes with a minimum or maximum, and they are set out in the cardholder agreement. The FCAC pages do not give a typical fee, so none is assumed here.

A cash advance abroad

Foreign cash advances combine two charges. The FCAC's foreign-purchase example converts €1,000 at an exchange rate of 1.45 to $1,450, adds a 2.5% foreign currency conversion charge of $36.25 and arrives at $1,486.25. It notes that foreign cash advances usually cost more, may include a conversion charge, and accrue interest from the withdrawal date. Apply that to a hypothetical €500 advance at the same rate: $725.00 plus a 2.5% charge of $18.13 is $743.13, and 30 days of interest at 22% adds $13.44, before any cash advance fee in the agreement.

Minimum payments and the long tail

The FCAC says minimum payments are either "a flat dollar amount, usually $10, plus any interest and fees" or "the higher of a dollar amount, typically $10, or a percentage of your outstanding balance, typically 3%." For Quebec residents the minimum has been 5% since August 1, 2025. Paying only the minimum, the FCAC says, takes longer and costs more interest.

This table assumes a $2,000 purchase balance at 19%, interest added monthly at one-twelfth of the annual rate, no new purchases and no fees. It is an approximation designed to show scale.

Paying the 3% minimum on $2,000 takes about 14.5 years and costs about as much interest as the original purchase. A fixed $100 a month, which is $40 more than the first minimum payment of $60, clears the same debt in about two years and cuts the interest by more than three-quarters. The minimum-payment trap guide works the same effect in more detail, and the minimum payment trap calculator and credit card payoff calculator run your own balance and rate.

Six statements of a minimum-payment balance

The long-tail table above compresses a lot of statements into a single number. Seeing the first six makes the mechanism visible. A $2,000 purchase balance at 19% is carried with no new purchases, interest accrues for 30 days at the daily rate and is added to the balance at the end of each cycle, and the payment is made at the end of the cycle. The two payment rules are the FCAC's two definitions of a minimum: the higher of $10 or 3% of the statement balance, and a flat $10 plus the interest charged.

(The interest column follows the 3% rule. The last column charges slightly more interest each cycle than the 3% column because its balance falls more slowly, but each payment in it is that cycle's interest plus $10, so the balance falls by exactly $10 a statement.)

After six statements and $352.31 of minimum payments under the 3% rule, the balance has fallen by only $171.74, because $180.57 of those payments was interest. Under the flat-$10-plus-interest rule the cardholder pays $245.05 over the same six statements and owes $1,940.00, a reduction of $60. The 3% rule pays down faster at first, but the payment shrinks as the balance shrinks, and that is what stretches the payoff to 14.5 years in the table above. Neither rule is a plan; both are the smallest payment the issuer will accept.

Where an extra payment goes

When more than one rate sits on the card, the order in which payments are applied matters. Take a card with $1,500 of purchases at 19% and a $500 cash advance at 22%, with a minimum payment of $60. Before any payment, the next 30 days would cost $32.47 in interest. The table compares what happens after three different payments.

The proportional row is one reading of the FCAC's word "proportionally", and an issuer's own method may split the balances differently. The difference between the second and third rows is about $0.90 in the first month, which is small, but the cash advance at 22% is the more expensive money. The cardholder agreement says which rule your issuer follows, and a call to the issuer confirms it.

Moving a balance: the arithmetic of a transfer

The FCAC says the interest-free grace period does not apply to balance transfers and that you still pay interest on the transferred amount. A transfer to a lower-rate card can still save money if the saving beats the fee. Every input below is hypothetical, including the 3% fee and the 8% promotional rate.

A cardholder owes $4,000 on a card at 19% and can pay $350 a month for 12 months.

The transfer saves $259.57 in interest and costs $120 in fees, a net saving of about $140 over the year, and it leaves $139.57 less of the balance outstanding. The result depends on three things the table assumes away: that the 8% rate lasts the full 12 months, that no new purchases go on either card, and that the fee is the only charge.

The FCAC's own comparison uses a $4,000 balance for one year with no new spending: a current card at 21% with no annual fee costs $472 in interest, and a low-rate card at 9% with a $50 annual fee costs $199, a saving of $273 after the fee. It also notes that introductory low rates usually last 6 to 12 months and that the rate rises afterward, and that federally regulated issuers must disclose the end date of an introductory rate, the transactions it covers, other conditions and the standard rate that follows. If the promotion ends after six months and the rate jumps, the comparison changes.

What can push your rate up

Missing a required minimum payment by the due date can raise your interest rate, according to the FCAC. The increase may be temporary or permanent, and you may lose a promotional rate. Federally regulated institutions must notify you before an increase takes effect, and the details are in the credit agreement or the information box on the application. An introductory rate can also end early if you exceed your credit limit or pay late.

Fees sit beside interest and are easy to miss. The FCAC lists merchant surcharges of up to 2.4% outside Quebec (on a $200 purchase that is $4.80), foreign currency conversion charges, over-limit fees, dishonoured-payment (NSF) fees, reprint fees and inactive-account fees. It also notes that federally regulated institutions cannot charge over-limit fees in some cases, such as a temporary hold by a merchant: with $90 of room, a $100 gas hold followed by a $20 actual charge incurs no fee.

What to look at on a real statement

The daily rate, the statement closing date, the payment due date and the previous statement's balance are the four inputs that explain almost every interest line. The previous balance is the one that matters most: if it was not paid in full, new purchases are likely already accruing interest from their own dates. For a card with more than one rate, the statement and agreement must clearly show each rate. The debt avalanche versus snowball guide compares payoff orders once you know which balance costs most, and the debt consolidation cost guide prices the transfer-or-loan decision. Guides on borrowing are grouped under Debt and borrowing on the guides and hubs page, and the FCAC's own credit card payment calculator estimates how long a balance takes to clear.

Sources

• FCAC, How credit cards work (21-day minimum grace period, grace period begins on the last day of the billing period, interest from the date of purchase if not paid by the due date, cash advances, cash-like transactions, credit card cheques, balance transfers, rate increases and notice, fees, foreign currency example, 19% and 22% example rates; dated 2025-10-15): https://www.canada.ca/en/financial-consumer-agency/services/credit-cards/credit-card-work.html (checked October 23, 2026)
• FCAC, Paying off your credit card (minimum payment definitions, Quebec 5% since August 1, 2025, how payments are applied to different rates; dated 2025-10-15): https://www.canada.ca/en/financial-consumer-agency/services/credit-cards/pay-off-credit-card.html (checked October 23, 2026)
• FCAC, Choosing a credit card (introductory rates, annual fee example, $4,000 one-year comparison at 21% and 9%, merchant surcharges up to 2.4%; dated 2025-10-15): https://www.canada.ca/en/financial-consumer-agency/services/credit-cards/choose-credit-card.html (checked October 23, 2026)
• The FCAC pages do not specify the day-by-day accrual method; the daily rate of annual rate ÷ 365 is a standard illustration, and the Cost of Borrowing (Banks) Regulations that once governed disclosure are repealed.