Pay less Credit Card interest

Do you have a credit card that you’ve had for years, but has an interest rate of 18% or something ridiculous? You should find a credit card that offers lower interest. This is important if you’re unable to fully pay the credit card balance each month.

It’s obvious that you’ll be worse off with the 18% p.a. interest rate credit card compared to the 13% p.a. credit card if everything else about the cards were the same. So how much worse off are you with an 18% p.a. interest rate credit card? This is best explained with a simplified example.

Example 1

Let’s say you spent $2,000 on your credit card at the beginning of the year and you make minimum monthly repayments of $25. The chart below shows how much you owe at the end of every 30 days. We’re assuming there’s no interest free period and interest is calculated daily.

If you had a 18% p.a. interest rate credit card, and you only paid $25 per month on your $2,000 purchase, you won’t end up paying that balance off.

Example 2

Now let’s say you were good and repaid $50 per month instead. The graph below shows the difference between balances owing at the end of each 30 day period for a 13% p.a. and 18% p.a. interest rate credit card.

You’re still worse off with an 18% p.a. interest rate credit card compared to a 13% p.a. card. You already knew that, but some people don’t know how much worse off they can be.

Conclusion

The benefit of changing to a credit card with a lower interest rate is fairly clear with this example. You can pay lower monthly repayments and reduce your interest costs. Simple.

Low intereset credit cards

View the low interest credit cards that we’ve reviewed.