Credit card interest is one of the most expensive kinds of debt in Canada — yet most cardholders can’t explain exactly how it’s calculated. This guide breaks it down: the grace period, the difference between purchase and cash advance rates, and what a carried balance really costs you.
The grace period
Most Canadian credit cards give you an interest-free grace period of about 21 days after your statement date. If you pay your full statement balance by the due date, you pay zero interest on your purchases. The moment you carry even part of the balance forward, the grace period disappears and interest starts accruing on new purchases from the day they’re posted.
Purchase vs cash advance rates
Your card has more than one interest rate. Purchase rates typically run from 19.99% to 25.99% in Canada. Cash advance rates are higher — and unlike purchases, cash advances get no grace period at all: interest starts the moment you withdraw the cash, plus you’ll usually pay an upfront cash advance fee. Balance transfer promotions are a third category with their own (often lower, temporary) rates.
What $1,000 carried for a year costs
Here’s a worked example. Carry a $1,000 balance for a full year at a 21.99% purchase rate, making no payments, and you’d owe roughly $220 in interest — bringing the total to about $1,220. (In reality, minimum payments would reduce this, but the math shows why revolving a balance is so punishing.) At 25.99%, that same $1,000 costs roughly $260 in interest over the year.
The minimum payments trap
Paying only the minimum keeps your account in good standing, but barely dents the principal. On a large balance, minimum payments can stretch repayment over many years and cost you more in interest than the original purchases. If you can’t pay in full, pay as much above the minimum as you possibly can.
Frequently asked questions
How long is the typical grace period in Canada?
About 21 days from the statement date on most cards — pay your full balance within that window and purchases accrue no interest.
Why is my cash advance rate higher?
Issuers treat cash advances as higher-risk lending: there’s no grace period, the rate is higher than the purchase rate, and a fee usually applies on top.
Is it ever smart to carry a balance?
Rarely. Rewards earned on a carried balance are dwarfed by interest charges. The one exception is a low-rate balance transfer promotion used deliberately to pay down debt.
Do balance transfers get a grace period?
Like cash advances, balance transfers generally start accruing interest immediately at the transfer rate — check your card’s terms for the exact rate and any transfer fee.
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Checked October 2026.