Why Do Canadians Pay $10 BILLION a Year in Interest on Their Credit Cards?
The average Canadian cardholder pays over $315 in interest payments per year to their credit card issuer! As a result, Canadian banks alone are earning $8-$10B every year in interest income from cardholders. The reason? While 45% of Canadians carry a credit card balance, over 30% don’t know the interest rate they are being charged. The problem is most credit cards charge 19.99%+ in interest.
Oddly, every bank actually offers low interest credit cards. If the majority of us took a low rate card when we should, our interest costs would be cut in half. The problem is consumers have difficulty anticipating when they are going to carry a balance, and as a result when they apply for their first card typically select one with attractive rewards and benefits, not low standard rates. We choose our card based on how we want to behave, or how we want to be perceived to behave, not on how we actually behave – a similar phenomenon to the stock market.
The good news is, there are plenty of low rate credit cards for Canadians to choose from. If you currently carry a balance, (average Canadian cardholder has a $2,700 credit card balance so don’t feel bad), and you’re paying more than 9.99% in interest per year, you need to transfer your balance to a lower rate card. All that means is that a new bank will pay off your credit card debt with your existing bank, and then you’ll owe the old balance to the new bank at a much lower interest rate (it’s done automatically when you apply).