Low-Rate vs Low-Fee Credit Card: Which to Choose?

Credit card are a popular payment method in Canada, offering convenience and flexibility for consumers.

However, with the variety of credit cards available, it can be challenging to determine which option is the best fit for your financial needs.

Two common types of credit cards are low-rate and low-fee cards. Low-rate credit cards typically offer a lower interest rate on purchases but may come with an annual fee and other charges.

On the other hand, low-fee credit cards may have higher interest rates, but come with lower or no annual fees.

So which should you choose: a low-rate or low-fee credit card? This article helps you decide which of the two is perfect for you.

Table of Contents

What are Low-Rate Credit Card?

Low-rate credit cards are credit cards that offer a lower interest rate than the average credit card.

The interest rate is the amount of money that is charged on your outstanding balance if you do not pay off your credit card in full each month. The lower the interest rate, the less you’ll pay in interest charges over time.

Most credit cards also come with cash advances and balance transfer interest rates. A low-rate credit card could also have a low cash advance and balance transfer rate.

Low-rate credit cards are a great option for those who carry a balance on their credit card from month to month.

These types of credit cards typically have an interest rate of 8% to 12.99%, which is much lower than the average interest rate of 19.99% for most credit cards in Canada.

Below are some examples of low-rate credit cards in Canada:

Credit Card	Interest Rate
MBNA True Line Gold Mastercard	8.99% on purchase and cash advance
Desjardins’ Odyssey Visa Infinite Privilege	9.9% on purchase and cash advance
Desjardins Flexi Visa	10.9% on purchase and cash advance
HSBC +Rewards Mastercard	11.9% on purchase and cash advance
Laurentian Bank’s Visa Black Reduced Rate	12.49% on purchase and cash advance

Pros of Low-Rate Credit Cards

Low rates: As the name suggests, low-rate credit cards offer lower interest rates than standard credit cards. These rates can be as low as 8.99% APR, which is significantly lower than the typical 19.99% APR for most credit cards in Canada. This can help you save money on interest charges if you carry a balance on your card.
No income eligibility: Most low-rate credit cards don’t have income eligibility. This means that people with a lower income can still be approved for these cards and benefit from the low-interest rates they offer.
Help build credit easily: Another benefit of low-rate credit cards is that they can be a useful tool for building credit given their low-interest rates.

Cons of Low-Rate Credit Cards

Limited rewards and perks: Low-rate credit cards generally offer fewer rewards and perks compared to credit cards with average-high rates. While some low-rate credit cards do offer rewards, they may be limited in comparison to other credit cards.
Above-average fees: While some have no annual fees, others charge above-average fees. This may impact your credit card cost and consequently hurt your credit score if you fail to make regular payments.

What are Low-Fee Credit Card?

Low-fee credit cards are credit cards that come with lower annual fees compared to other credit cards. These cards are designed to help Canadians save money by reducing the costs associated with using a credit card.

While some low-fee credit cards may have no annual fee, others may charge a small fee, usually under $100, which is much lower than the annual fees of premium credit cards.

These types of credit cards also have low fees on balance transfers, late payments, and other services.

Low-fee credit cards can be a good option for those who are looking for a credit card with fewer benefits and features but still want to have access to the convenience of a credit card.

They can also be a good option for those who are looking to build credit or maintain their credit score without paying high fees.

It’s also important to note that low-fee credit cards may have higher interest rates compared to premium credit cards, so it’s important to pay your balance in full each month to avoid paying interest charges.

The following are some examples of low-fee credit cards.

Neo Financial Credit Card (no annual fee)
Tangerine Money-Back Credit Card (no annual fee)
BMO CashBack Mastercard (no annual fee)
Simplii Financial Cashback Visa Card (no annual fee)
PC Financial World Elite Mastercard (no annual fee)

Pros of Low-Fee Credit Cards

Low or zero annual fees: Low-fee credit cards typically have lower annual fees than other credit cards or even no annual fees at all. This means that cardholders can save money on their credit card expenses and avoid the burden of high fees.

Rewards and perks: Low-fee credit cards may also come with rewards and perks such as cash back, travel rewards, or points that can be redeemed for merchandise or other rewards. These rewards and perks can be a valuable addition to a cardholder’s financial strategy, allowing them to earn benefits from their purchases without paying high fees.
Easy access to credit: Low-fee credit cards can also provide consumers with access to credit. For consumers who are building credit, a low-fee credit card can be a useful tool for establishing a credit history and improving their credit score.

Cons of Low-Fee Credit Cards

High-interest rates: While some have no annual fees, others have higher fees. Even though the low annual fee might make them seem attractive, the interest charges can add up quickly, especially if you carry a balance from month to month. If you do not pay off your balance in full each month, you could end up paying a significant amount of interest on your purchases.
Income eligibility: Some low-fee credit cards in Canada require a minimum income level to qualify. This can be a disadvantage for people who do not meet the income requirement, as they may not be able to get approved for the card.
Limited rewards and benefits: One of the primary disadvantages of low-fee credit cards in Canada is that they often come with limited rewards and benefits. While these cards may offer lower annual fees or interest rates, they may not provide the same level of rewards or perks as higher-fee credit cards. For example, low-fee cards may offer lower cash back percentages or limited bonus categories for earning rewards.

Low-Rate vs Low-Fee Credit Cards: Which to Choose?

When choosing a credit card, there are many factors to consider, including:

Interest rates
Fees
Rewards and perks
Eligibility

One of the most important decisions is whether to opt for a low-rate or low-fee credit card.

Low-rate credit cards can be a good choice for those who carry a balance on their credit card from month to month.

With a lower interest rate, less of your payment goes toward interest charges, and more goes toward paying off your balance. However, low-rate credit cards often come with higher annual fees and fewer rewards.

Low-Fee Credit Cards

On the other hand, low-fee credit cards are a good choice for those who want to avoid paying extra fees and don’t carry a balance on their card.

However, these cards often come with higher interest rates, which can be problematic if you carry a balance from month to month.

Ultimately, the best choice between low-rate and low-fee credit cards depends on your spending habits and financial goals.

If you carry a balance on your card, a low-rate card may be a better choice. If you pay off your balance in full each month and want to avoid fees, a low-fee card may be a better choice.

It’s important to compare different credit card offers and read the fine print carefully to choose the card that fits your needs.

Alternatively, you can have a mix of low-rate and low-fee credit cards at once or choose a credit card that has low rates and low fees.

Below are some of the example of credit cards that have low rates and low fees:

Credit Card	Interest	Annual Fee
Desjardins Flexi Visa	10.9% on purchase and cash advance	None
TD Business Select Rate Visa Card	11.99% on purchases & cash advances. Pay a $49 annual fee to lower the purchases and cash advances interest to 8.99%	None
MBNA True Line Mastercard	12.99% on purchase	None
RBC RateAdvantage Visa	Prime + 4.99% – 8.99% on purchases and cash advances	None

The bottom line is, you can’t go wrong with either a low-rate or low-fee card depending on your situation.

With the above, I hope that you’re now informed about which credit card is more suitable for you. If you need more clarification, let me know in the comment.

Before leaving, check out the following related Articles to expand your options: