A credit card with an extremely low interest rate may be easier to find than you think.
One of the most basic financial tools most Australians have in their arsenal is the credit card, and one of the most basic charges you’ll be familiar with if you have one is interest.
Finding a credit card with a relatively low interest rate can be a money saver for the right type of spender.
Credit cards with some of the lowest interest rates
Rates last updated September 1st, 2015.
- NAB Low Rate Credit Card
0% for 12 months purchase rate offer extended to 11 October 2015
April 19th, 2015
- Citi Clear Platinum Card
Balance transfer and purchase offer changed now to 0% for 9 months.
July 9th, 2015
- ANZ Low Rate Platinum Credit Card
This balance transfer offer has been extended by ANZ for the foreseeable future.
September 1st, 2015
How do credit cards with a cheap interest rate work?
Credit cards with low-interest rates work in the same way as a regular credit card. You make purchases using your card, receive your statement, and then pay part or all of the funds due.
These cards have a few general characteristics, although because of the ever-evolving market, these aren’t hard and fast rules:
- Lower annual fees
- No rewards programs
- Higher number of interest-free days
- Usually aren’t platinum cards.
Before you start looking at these types of cards ask yourself:
- Do you regularly pay interest on your balances each month? Don’t simply go for the card with the lowest interest rate if you pay your card off in full each month. Cards with low or no annual fees can be a better alternative in this case.
- Would a balance transfer be more useful? the balance transfer period, how much you can actually transfer, and if you transfer from one particular lender to the other.
How to compare credit cards with low-interest rates
Compare credit cards with low-interest rates by looking at the factors listed below:
- Interest rate. The main reason why you probably want a credit card with a low-interest rate is because you’re going to be paying interest each month. Ensure this figure is reasonable in conjunction to the annual fee.
- The annual fee. In addition to the interest rate, the annual fee will be an indicator of how much you’ll be paying each year.
- Current deals. Many credit cards offer low purchase rate or balance transfer rate deals as an incentive. These can be useful depending on how you’re going to use your card. If you’re getting a low interest rate card to make a big purchase when you first get your card, a low or 0% purchase rate deal might be a good option.
- Hidden fees and charges. If you travel overseas often, using your card to make purchases in foreign currencies can incur foreign transaction fees and ATM withdrawal fees. You can also be charged fees for cash advances, late payment and more. If you’re likely to incur a number of these, you might want to find a card with lower fees.
- Rewards programs. Some cards with low purchase rates may also come with a rewards program. These can add to the cost of the card through higher annual fees, so calculate the value of any rewards you’re likely to receive in a year and ensure it equals or exceeds the annual fees you’re going to pay.
- Interest free days. Credit cards on the lower side of the interest rate spectrum are no different to regular credit cards. Some cards will come with no interest free days, whereas others will come with 55, and yet some will sit somewhere in between. How many days you need to pay each statement off depends on you.
Pros and cons
- Pay less in interest
- Pay less in annual fees
- Most give you 55 days interest-free
- Uncomplicated – it’s just you, your card and your purchases
- No rewards programs
- No platinum benefits e.g. concierge, discounts,
- complimentary insurances
Things to avoid with a credit card with a cheap interest rate
As always, credit cards require discipline, and even if a credit card has a low interest rate this rule still applies. Here are some other things to avoid with this type of card:
- Making needless purchases - Unless you have a 0% interest deal on your card, any purchase that will incur interest will cost you more than the original price. Interest, no matter how small, is something you want to avoid having to pay.
- Paying for features you won’t use - While a rewards program may sound good, if you’re not going to be using the card for regular purchases you could just end up paying higher annual fees for a feature of little benefit.
- Take note of your payment patterns - Likewise, if you’re paying a higher annual fee for a card with 55 days interest-free, and you pay your balances off the next day then again this feature may not be worth it.