With annual inflation in Canada reaching its highest level in more than 30 years, interest rates may rise faster and higher, making mortgages and bank loans more expensive.

But consumers are unlikely to feel additional pressure in their wallets when it comes to interest rates on their credit cards, which are not expected to be affected by interest rate hikes.

Natasha MacMillan, Director of Everyday Banking and Credit Card Specialist at Ratehub.ca, an online website that allows Canadians to find and compare various financial products, including credit cards, says:
MacMillan says credit card interest rates have generally not followed the hikes or cuts issued by the central bank.

Earlier this month, the Bank of Canada raised the key interest rate by half a percentage point to one percent, the largest single increase in more than 30 years, warning of further interest rate hikes. The benchmark rate remained below three percent since the 2008 financial crisis.

Credit card issuers typically earn money in several ways such as charging transaction fees to businesses and interest on cardholders.

The vast majority of Canadians over 18 years old — 93 percent — have a credit card, with 41 percent of them saying they carry a balance from month to month, according to a 2019 research report published by the Canadian government.

With interest rates on reward-based credit cards usually set at around 19.99 percent in Canada, a significant portion of Canadians pay a large amount of interest, the government notes. The interest rate on cash advances for credit cards is higher, ranging from 21.99 percent to 24.99 percent, according to Ratehub.ca.

MacMillan says there are also low-interest credit cards that only charge about 10 to 12 percent.

The government notes that interest rates on credit cards can increase by five percent or more if the required minimum monthly payments are not made by the deadline, an increase which can be temporary or permanent.