In return for this, the bank charges you a fee. This is called "interest."
If you always pay the amount owing on your credit card by the payment due date, you never have to pay interest. In Canada, 71% of all Bank Card holders pay their balances all or most of the time.

If you don't pay the amount owing on your credit card in full by the due date, the interest your credit-card issuer charges you will depend on the type of transaction in question: a new purchase, a previous purchase, a cash advance or a balance transfer.

New purchases
New purchases are items that appear on your monthly statement for the first time. Certain conditions can make these purchases interest free for a defined period. Inquire with the issuer of your credit card about the nature of your "interest-free period."

Previous purchases
These are purchases that have appeared on a past statement, but that you have yet to pay off. Interest is charged on these from the date you made these purchases until they're paid for in full. Some credit-card issuers charge interest from the date the purchases are posted to your account.

Cash advances and balance transfers
The issuing bank or financial institution treats cash advances like loans, not like purchases of merchandise. As such, you're charged interest from the date you took the cash advance or made the balance transfer.

Interest calculation method
When your credit-card company calculates the interest you owe, it normally does so with one or two methods:

Average daily balance method
The average daily balance on your credit card is the balance you carried during the billing period, averaged by the number of days in the billing period. Your average daily balance is calculated at month's end by adding the balance at the end of each day, then dividing the total by the number of days in the billing period. To calculate the interest charged for the month, banks multiply the average daily balance by the daily interest rate. Then they multiply the result by the number of days in the billing period.

Daily balance method
This interest-calculation method calculates interest owed at the end of each day of the billing period, versus the month-end-only calculation that is the hallmark of the average daily balance method. To calculate the daily interest charge, banks multiply the daily balance by the daily interest rate and then add up the resulting daily interest charges for a monthly total.