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.

Featured Low Interest Credit Card

Save up on interest rates. Apply for a new Suncorp Clear Options Standard and take advantage of the promotional 2.9% p.a. for 12 months on balance transfers. Balances from all other credit cards may be transferred, except from other Citi group or Suncorp Cards. You will also save with a low ongoing rate on purchases

• $27 (Usually $55) annual fee
• 12.74% p.a. on purchases
• Cash Advance Rate of 21.99% p.a.
• 0 days interest free
• Minimum Income Requirement of $25,000 p.a.
• Enjoy generous credit limits of up to $20,000

Read the Suncorp Clear Options Standard Visa Card terms and conditions.

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 interest credit cards

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

Image source: MoneyBlogNewz