Credit cards are incredibly convenient when it comes to making purchases and accessing money.

However, it is important to know the role that interest plays when it comes to your credit card. Most people don’t understand the different interest rates charged on their credit cards and end up with a lot of debt. Here’s an overview of how credit card interest works in Canada.

Credit card interest is the amount of money the account holder pays to settle the outstanding balance on a credit card account. These interest rates can range from 0% to 29.99% on an annualized basis.

On many credit card accounts, these interest rates can vary depending on several factors, including the prime interest rate, the type of purchases and transactions made and the type of account.

Your credit card probably has several different types of credit card interest rates. Here is an overview of the most common types of interest rates for credit cards.

The most common interest rate is the purchase interest rate. This interest rate applies to almost all types of purchases.

Generally, you have a “grace period” during which you can repay your purchase without having to pay interest. This grace period can range from 15 to 30 days. Check your credit card agreement for details.

With most credit cards, you will be able to get cash back at a point of sale or withdraw cash from an ATM. Every time you withdraw money from your credit card, you pay a special interest rate on the cash advance. This interest rate tends to be higher than the interest rate on purchases.

You should therefore be careful when making cash advances on your card.

There may also be a special interest rate on cash-like transactions on your credit card. For example, if you make a bank transfer with your credit, you will be charged a special interest rate.

This interest rate will tend to be higher than the interest rate on purchases.

When you open a credit card account, you can take advantage of an introductory interest rate. This interest rate will usually be significantly lower than the normal interest rate. In some cases, this introductory rate may be 0%.

The introductory interest rate is designed to encourage heavy use of the card when you get it. On most accounts, the introductory rate can be in effect from three to six months. It is therefore important to pay off the balance before the conventional interest rate comes into effect.

Credit card interest rates are presented as an annualized percentage rate or (APR). However, the interest rate on your credit card is prorated from the time the grace period expires.

For example, let’s say you buy airline tickets for $500. Your credit card grace period is 20 days with an APR of 22.99%. You pay $250 of the $500 purchase within 7 days. Then you pay the remaining $250 40 days after purchase. The credit card will charge you a 22.99% APR for the 20 days following your grace period on the $250. The interest rate charged will be 0.869% on the $250, or $2.17.

According to WalletHub, the average credit card rate is 17.87 percent for new offers and 14.84 percent for existing accounts. The interest rate on a card may vary over time depending on the prime rate. This means that if the prime rate goes up, your interest rate may increase, even if you have a perfect and timely payment history.

Since your credit card interest rate can be as high as 29.99%, it’s important to keep it as low as possible. Here are some steps you can take to keep your credit card interest rate as low as possible.

The first thing to do is to look for a credit card that offers you a particularly low introductory rate. Ideally, you should find a credit card that offers a 0% introductory rate.

If you have a credit card with a higher interest rate, you can transfer the balance from the high interest credit card to the low or no interest credit card.

Another way to potentially reduce your credit card interest rate is to increase your credit score. Your credit rating is the result of your credit report from Canada’s two major credit reporting agencies: Equifax Canada and TransUnion Canada.

You can improve your credit rating by paying all your bills on time, reducing your credit utilization and making sure there are no past due notices on your account. You can request a free copy of your dossier de crédit every 12 months from both credit bureaus.

Finally, you can ask for a lower interest rate. A credit card company is more likely to reduce the interest rate on your credit card if you have an excellent history of making timely payments and using your credit card often.

A basic understanding of credit card interest rates will help you make smarter purchases and stay ahead of your credit card payments. Be sure to check the interest rates on your current credit card. Your wallet will thank you.