You probably already know that when you use a credit card, you will have a charge for interest on any balances that are unpaid. However, not everyone is aware of exactly what interest is and how it works in Canada. For those who never carry a balance, you don’t need to know the specifics. But if you do, understanding the way it is calculated can be helpful when it comes to your finances. We’ll provide the basics here, but more information can be found using a 4 Pillars debt consultant in Victoria.
Purchases on a Credit Card
You won’t see interest on purchases the second they happen, it’s often after three to four weeks instead. In that time period, if you pay off the purchase, there will be no interest. Some cards offer longer periods during the introductory offer. If you aren’t sure what the case is for you, get in touch with your card issuer for details. Here’s where it gets trickier. If you don’t pay the balance, the interest starts back on the day you made the purchase.
Cash Advances on Your Card
There is typically no grace period in place with a cash advance. Instead, the day you take out the money, you will begin accruing interest. This interest is often much higher than the interest you pay on purchases, so it’s best to avoid advances unless absolutely necessary. As an example, your APR might be around 20% on purchases while cash advances might be closer to 23% on average.
Credit Card Balance Transfers
Another interest rate that is typically higher than the one for purchases is a balance transfer. However, an introductory offer may make this lower or non-existent. You should also be aware that most of the balance transfer cards that have 0% interest only offer that on the balance transferred but not new cash advances or purchases. If you were to miss a payment or pay late, you often will be voiding your 0% interest, which means you’ll pay the regular interest rate. As such, this is one area to be cautious no matter what you were promised.
You also need to know that interest is always paid first with your payments, with each credit card issues choosing how the remainder of the payment is applied. If you’re looking to learn more or find a way to lower your payments, you want to get in touch with a 4 Pillars debt consultant in Victoria. You can learn more at www.4PillarsDebtConsultants.ca.