Credit card grace period, interest and the 35% cap in Canada: how charges are calculated

On a Canadian bank credit card, you pay no interest on purchases if you pay the full statement balance by the due date, and the due date for the minimum payment cannot be set less than 21 days after the end of the billing cycle (Bank Act, section 627.34). If you pay less than the full balance, interest is generally charged on the purchases from the date of each transaction until they are paid, not just on the unpaid part, so a "nearly full" payment still costs real money. Cash advances are different: interest usually starts the day you take the cash. And since 1 January 2025 no card can lawfully charge more than 35% APR under the Criminal Code.

This guide belongs to the cashback versus points overview. It is general information; interest rates are illustrative.

The 21-day rule in the Bank Act

Section 627.34 of the Bank Act says that, for a credit card account used by an individual for non-business purposes, a bank must:

• send a statement for each billing cycle without delay after the cycle ends;
• not require the minimum payment to be made earlier than 21 days after the last day of the billing cycle;
• treat a payment made on the next business day as on time when the due date falls on a day that is not a business day;
• not charge interest on purchases made during the cycle if the full balance is paid by the due date.

In Quebec, the Consumer Protection Act has a parallel rule: the statement must be sent at least 21 days before credit charges can apply; see Quebec's rules.

The information box on your application and agreement shows the grace period in days, and your statement shows the amount you must pay by the due date to keep the benefit of the grace period; see disclosure rules.

What happens when you pay less than the full balance

The 21-day rule protects you only when you pay in full. When you do not, most card agreements charge interest:

1. on each purchase from the transaction or posting date until it is paid, and
2. on any unpaid balance carried into the next cycle.

The exact method is in your agreement, which must explain how interest is calculated.

Illustrative example. You make $1,000 of purchases, on average 15 days before the statement date, at a purchase rate of 20.99%. The due date is 21 days after the statement.

• Pay $1,000 by the due date: $0 interest.
• Pay $900 by the due date: interest on the full $1,000 for about 36 days is $1,000 × 20.99% × 36 ÷ 365 ≈ $20.70, plus interest on the $100 still unpaid for the next month, about $100 × 20.99% × 30 ÷ 365 ≈ $1.73.

Paying 90% of the balance cost about $22, roughly the cashback on $2,200 of spending at 1%. That is why rewards and carried balances do not mix.

Interest rates on a typical card

A card usually has several rates, all shown in the information box:

Statements must disclose any circumstances that could cause the rate to increase and the new rate that would apply. When there is more than one rate, the Bank Act says payments above the minimum must be applied either to the highest-rate balance first or proportionally, at the bank's choice (section 627.35).

The 35% criminal interest rate

The Criminal Code (section 347) sets the maximum interest on credit. For agreements entered into from 1 January 2025, the limit is 35% APR, replacing the old 60% effective annual rate. "Interest" includes most fees and charges for the credit, not only the stated rate.

For credit cards this is a ceiling, not a typical price: standard bank card rates are generally well below it. Some high-cost and alternative lenders' products have historically come closer to the limit; check the APR before you sign. If you think a card or credit product charges more than 35% APR once fees are included, keep the agreement and statements and complain to the issuer, then follow the complaints route.

Rate changes and notice

• A bank must disclose most amendments to the agreement at least 30 days before they take effect under the Financial Consumer Protection Framework Regulations; certain changes, such as a decrease in a fixed rate or an extension of the grace period, are disclosed later on the next statement.
• If your rate is tied to a public index, changes in that index apply automatically and are shown on your statement.
• In Quebec, the OPC says a rate increase requires a notice at least 30 days before it takes effect, and under the province's newer rules changes that raise the rate or fees may be made only at the consumer's request.

Strategies that keep interest at zero

• Set up an automatic payment of the full statement balance, not the minimum.
• Pay a few days before the due date: a payment from another bank can take time to post.
• If you cannot pay in full this month, pay as much as possible and stop using the card for new purchases until it is cleared, because new purchases may also attract interest while a balance is carried.
• Use the payoff plan calculator to set a fixed monthly amount with an end date.
• Avoid cash advances; see cash advances and credit card cheques.

Frequently asked questions

Does the grace period apply to a balance transfer?

Usually not. Balance transfers are often treated like cash advances, with interest from the transfer date at the promotional or regular rate. Read the offer; see the balance transfer example.

If I pay the full balance one month after carrying a balance, is there still interest?

Often yes, for the days between the start of the cycle and your payment (sometimes called trailing or residual interest). It usually appears on the next statement. Paying in full again ends it.

Is the interest rate on my card capped below 35%?

There is no lower general legal cap for bank cards; the market sets rates within the Criminal Code limit. Quebec has additional rules for high-cost credit.

Who checks that banks follow the 21-day rule?

The Financial Consumer Agency of Canada supervises banks' compliance with the Bank Act's consumer provisions.

Sources

• Justice Laws Website — Bank Act ss. 627.34 and 627.35, Financial Consumer Protection Framework Regulations (SOR/2021-181), Criminal Code s. 347
• Financial Consumer Agency of Canada — how credit card interest is calculated
• Office de la protection du consommateur — Quebec statement and credit charge rules
• Canada Gazette — Criminal Interest Rate Regulations (SOR/2024-114)