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What is Purchase Interest?

Have you ever noticed a purchase interest charge on your bank statement? When you think of credit card interest rates, many things come to mind, but the most prevailing has to be purchase rates. This is because one of the primary use of a credit card is to fund regular purchases.

With a credit card, you can buy goods and services with money from your card issuer—basically, this means borrowing money from your lender.

As with every lender, there are interest rates attached to every money you borrow. Most credit cards have a monthly grace period to repay your debts without incurring extra charges.

However, once this grace period elapses, you’ll start being charged on your debt. This is where purchase rates come in, as you’ll be charged at the goods and services’ purchase rate.

There are different types of interest rates attached to credit cards in Canada. The purchase interest is one of them. If you own a credit card, you should be aware of these interest rates and how they may affect you. You will find all you need to know about purchase interest in Canada in this article.

Purchase Interest Meaning

Purchase interest is the annual interest that you will be charged on any balance resulting from regular purchases on your credit card. This interest is only charged when you do not pay the entire balance by the due date on your statement period after the grace period.

The grace period is the number of days, usually 21 days in Canada, when you won’t be charged interest on your regular purchases, provided you pay before the end of the grace period. 

Most credit cards in Canada have a purchase interest rate of 20%. This means that you are likely to pay 20% of your regular purchases at the end of the year if you do not pay your account statement’s total balance after your grace period.

Credit cards with a 0% introductory rate usually have their credit cards’ purchase rate starting at 0%. The duration of the introductory rates may vary depending on the card. 

Credit cards have varying purchase rates, and they work differently. Some credit card interests are charged after the grace period expires, while some are charged without considering the grace period. Some credit card interests rates include:

  • Balance transfer interest – the rate is usually around 22.99%
  • Penalty interest – the rate is about 30%
  • Variable interest – the rate depends on the Canadian Prime Lending Rate
  • Fixed interest – most credit cards have fixed interest rates

How Purchase Interest Works in Canada

Every credit card issuer has its set rates. Your issuer may charge several different interest rates depending on your card type. However, some credit cards come with purchase promotions that offer an introductory purchase rate or low interest on new purchases made within a duration.

For instance, you can get a card with an introductory purchase interest that allows you to pay off new purchases at lower interest rates. However, once this promotional period ends,s the regular purchase interest will commence.

Note that this rate is usually higher, and you’ll start paying it on both new and existing purchases that you were unable to pay off during the introductory period. There are no zero-interest credit cards in Canada, but you can find low-interest credit cards or prepaid credit cards.

Alternative Cards

If you cannot pay your entire balance by your statement due date after your grace period, you will be charged purchase interest.

This could cause you to be in debt, which could be hard to get out of. To avoid this, you should pay your entire balance on time or use one of these alternative cards.

1. Low-interest cards

These are credit cards with low interest rates. Below are some of the best credit cards with low interest rates in Canada;

  • HSB Rewards+ Mastercard 
  • BMO Preferred Rate Mastercard
  • Scotia Bank Value Visa
  • MBNA True Line Gold Mastercard
  • National Bank Syncro Mastercard

2. Prepaid Cards

Prepared cards are like credit cards, except that you preload money on them instead of owing money. There is no interest in prepaid cards. Some of the best-prepaid cards in Canada include:

  • KOHO Premium Prepaid Visa
  • KOHO Prepaid Visa
  • Stack Prepaid Mastercard

Since there are no interest-free credit cards in Canada, the above might be the best options if you want to avoid high interest rates and more debt.


Purchase interest is only avoidable if you pay your balance in full before your statement’s due date after your grace period elapsed. Other than that, it is almost impossible to avoid it, except you are using a prepaid card. A low-interest rate credit card can also be helpful as you will pay lesser than average.

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