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The True Cost of Minimum Payments

Canada's credit card minimum payment rules are designed to keep you in debt as long as possible. A typical minimum of 2% of your balance on a $5,000 debt at 19.99% means your first minimum payment is just $100 — but over $83 of that goes to interest. You pay down only $17 of principal. As your balance slowly decreases, so does your minimum payment, stretching repayment out for decades.

The most effective strategy: treat your minimum payment as a floor, not a target. Fix your monthly payment at an amount you can sustain, and never reduce it even as the minimum drops. Every extra dollar above the minimum goes directly to principal, cutting both your payoff timeline and your total interest dramatically.

How Canadian credit card interest actually works

Your card quotes an annual rate, but interest is calculated daily. A 19.99% card charges roughly 0.0548% per day (19.99% ÷ 365) on your balance, and that interest is added to the balance so tomorrow's interest is charged on it too. That daily compounding is why a balance that feels manageable grows faster than the headline rate suggests.

The grace period is all-or-nothing. Pay your statement balance in full by the due date and you pay no interest on purchases. Pay even a dollar less and interest is typically charged on the entire balance — often back-dated to each purchase date, not from the due date. This is the single most expensive misunderstanding in Canadian consumer credit: people who "pay most of it" are frequently charged as if they paid none of it.

Cash advances have no grace period at all. Interest starts the day you take the money, usually at a higher rate than purchases, and there is normally a flat fee on top. Using a credit card at an ATM, for a balance transfer without a promotion, or for cash-like transactions such as money orders is materially more expensive than a purchase of the same amount.

Typical Canadian card rates

Check your own statement — the rate is printed on it, and it may differ from your card's advertised rate if you have missed payments.

If you carry a balance, the rate matters far more than the rewards. Earning 2% cash back while paying 20% interest is a losing trade on every dollar you carry.

The minimum payment trap — and Quebec's exception

Outside Quebec, most Canadian cards set the minimum at the greater of about $10 or 2–3% of the balance. Because that minimum shrinks as the balance falls, paying only the minimum stretches repayment across decades and can cost more in interest than the original purchase. Run the numbers above with a minimum-only payment and the gap is usually startling.

Quebec is different. Under Bill 134, the minimum payment on Quebec-issued cards rose in steps and reached 5% of the balance on August 1, 2025. Cards opened after August 2019 were at 5% from the start; older cards climbed 0.5 percentage points a year to get there. A Quebec cardholder is therefore forced to repay considerably faster than someone with an identical balance in Ontario or Alberta — the payment feels harsher month to month, but it saves a great deal of interest.

Four ways to pay it off faster

1. Ask for a lower rate. The cheapest move available, and the least used. Call the number on the back of the card and ask to be moved to the issuer's low-rate product. Long-standing customers in good standing are frequently approved, and a drop from 19.99% to 12.99% cuts your interest by roughly a third with no change to your payment.
2. Pay more often than monthly. Because interest accrues daily, splitting your payment in two and paying every two weeks reduces your average daily balance and therefore the interest charged — even though the monthly total is identical.
3. Use a balance transfer, but count the fee. Promotional rates near 0% for 6–12 months are real, but almost always carry a transfer fee of 1–3%, and the rate reverts to roughly 21% afterwards. It works only if you clear the balance inside the promotional window.
4. Stop using the card you're paying down. New purchases are added at the same rate and, once you carry a balance, they lose the grace period too. If you cannot leave it alone, move the card out of your wallet and delete it from your saved browser payments.

If the balance is large enough that none of these close the gap, read our guide to getting out of debt in Canada — it covers consolidation, credit counselling, consumer proposals and when each one actually makes sense.

Credit Card Payoff — Frequently Asked Questions