Credit Card Finder Comparison Service Australia
Compare

Interest Rate Repayment Explanation

Posted September 4th, 2008 and last modified April 19th, 2010
St George Vertigo Offer

Best Low Interest Credit Card

The St.George Vertigo is the best low interest credit card. It features two amazing introductory offers on both purchases & balance transfers for the first 6 months. It also has a low annual fee and 55 days interest free.

  • $55 annual fee
  • 12.49% p.a. on purchases
  • 2.99% p.a. for 6 months on balance transfers
  • Cash Advance Rate of 21.24%
  • The ideal credit card for shopping

The most common financial term you will hear from day to day would very likely be Interest rates. The term is no different for credit cards. The key feature by which people tend to judge cards by is their interest rates. This article will explain what exactly an interest rate is on a credit card, along with how to ultimately reduce your interest repayments.Interest Rates

Financial providers and banks make the majority of their money from credit cards via interest rate repayments. If you’re late on your payments, generally they will penalize you with an inflated rate.

Two different rates are often available on a credit card, a purchase rate and a cash advance rate.

What is the difference between these 2 interest rates?

-
Purchase rate: Using your credit card for over the counter, telephone or online purchases. Self explanatory, basically the interest rate charged on purchases.

Cash advance rate: Most banks charge a separate, higher interest rate, and a cash advance fee (ranging from 1 to 5% of the amount of cash taken) on cash or cash-like transaction (called “quasicash” by many banks). For instance, if you withdraw $100 cash, you may imposed a 2.5% fee equating to $2.50, on top of a high interest rate of 19.99% on the withdrawn amount.

These transactions are usually the ones for which the bank receives no transaction fee from the payee, such as cash from a bank or ATM, casino chips, and some payments to the government (and any transaction that looks in the bank’s discretion like a cash swap, such as a payment on multiple invoices).
In effect, the interest rate charged on purchases is subsidized by other profits to the bank.

Interest rates typically range from 9-20%. One of the lowest interest rates currently belongs to the St.George Vertigo card at 11.49%. Since interest on your credit card is paid monthly, you can effectively divide the interest rate given (The Annual Percentage Rate or APR) to find out what you repay monthly.

Interest Rate Calculation

If you made a $100 purchase on the 20th of September, and repaid your total $100 balance on the 10th of October (30 days later), and your interest rate is 15%, your repayment will typically be $101.25. Thus you have paid $1.25 in interest. The maths:

15% of $100 = $15. This is what you would pay if you took 365 days to repay your purchase, calculated on your APR.
Since it only took 30 days to repay your purchase, you can effectively divide your APR by 12 to find out your monthly interest rate payment.
For simple and advanced interest calculations, see our Credit Card Repayment Calculator.

Lowering your Interest Repayments

So how can you keep your interest repayments to a minimum? The good news is, competition between Australian banks forces them to lower interest rates in order to compete, resulting in our interest repayments actually being relatively low.

The even better news is, most cards come 55 days interest free. Basically, this means that if you pay off your purchases within 55 days of your last statement, you pay 0% interest on them. However, interest free days aren’t available on cash advances, so limit the cash advance withdrawals you take if you want pay minimum to nil.

If you aren’t aware of Balance Transfers (another key element in saving money with credit cards), Read our guide to balance transfers here.




Show Comment Form

Add a Comment

Please note: Comment moderation is enabled and may delay your comment.
There is no need to resubmit your comment.


HSBC Visa Balance Transfer Credit Card

Editor's Choice: Our Top Credit Cards


Credit Card Card Details Interest Rate (p.a.) Cash Advance Rate (p.a.) Balance Transfer Rate (p.a.)

Annual fee

Interest free days (up to)

HSBC Credit Card
HSBC Credit Card
Balance Transfer & No Annual FeeEditor's Choice:
0% for 6 months Balance Transfer & No Annual Fee

Featuring a $0 annual fee for life, and 0% p.a. balance transfer for 6 months, the HSBC Credit Card was voted the Best Transactor Credit Card for 2010.
16.99%20.75%0% for 6 months$055 Apply Now For The HSBC Credit Card
Read More About The HSBC Credit Card
Suncorp Clear Options Standard Visa Card
Suncorp Clear Options Standard Visa Card
A great 12 month balance transfer offer, combined with a low annual fee and a good interest rate on purchases.12.24%17.99%1.9% for 12 months$390 Apply Now For The Suncorp Clear Options Standard Visa Card
Read More About The Suncorp Clear Options Standard Visa Card

Card Types

Card Tips

The Basics


Credit Cards
Learn about different credit card concepts, but most importantly how to compare credit cards online and save.

Popular Articles


Best Balance Transfers
The most competitive 0% p.a. and 'for life' offers of 2010.

Guide to Credit Ratings
Information about your credit file. Find out what you can apply for with good and bad credit.

Rewards Comparison
Australian reward program details including point capping & expiry.

Foreign Fees & Charges
International transaction charges from credit card companies.

Calculators

Interest Repayment Calculator
Enter your balance(s) to calculate the interest to pay on your credit cards.

Balance Transfer Calculator
Input a balance transfer offer to calculate your potential savings.
Credit Card News the latest rates & headlines

Free e-Book

NEW: The Ultimate Guide to Balance Transfers
The Australian Guide to Balance Transfers written by Credit Card Finder
Download our FREE e-book normally valued at $24.95. Find out how you can save hundreds to thousands of dollars on your credit cards via balance transfers.

Enter your email below to receive our Free e-book.



   

Get Free Updates





 

As seen on:
Time Magazine

Ninemsn

Today Tonight

Today Show

ABC Television





Sky News

Herald Sun

Channel 10

Australian Web Industry Association

Anthill Magazine

Smart Company



Money Management Tips Credit Card Guides Finance Tips and Advice
Partnered Sites Secondary Credit Card Providers About CreditCardFinder.com.au

Fido Credit Card Information Guide to choosing a card, and general day-to-day tips on living
with and managing your card
Understanding Credit Understand your options
and what you will pay in interest and charges
ACCC Debt Management Guide
Request a copy of your credit file

Contact Us
About Us
Blog
Privacy Policy
Sitemap

100% GreenPower Carbon Neutral Website