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 Cheapest Credit Card Interest Rates:
Rates last updated August 28th, 2014.
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? If you have a credit card/cards with a large balance and you’re viewing a low interest credit card as a way to stay afloat while you attempt to pay them off, a balance transfer may be a better option. Please keep in mind that there a number of considerations you must take before completing a balance transfer, like 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 for the privilege of having a credit card.
- 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 for instance, using your card overseas either physically or online can come with foreign transaction fees and ATM withdrawal fees. Similarly there are also fees for making cash advances, late payment fees and more. If you’re likely to have to pay them try 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 of credit cards with the cheapest interest rates
- 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 you make using your card which you pay interest on 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 – A card with a rewards program attached to it may sound good, but if this card isn’t going to be used for regular purchases you’re going to be paying higher annual fees for a feature of little benefit. 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.
Frequently asked questions about cheapest rate credit cards
What’s better, a credit card which always has a low purchase rate, or a card which has a low introductory purchase rate offer for a number of months only?
This depends on how you plan to use your card, so there’s no one answer. Spenders who plan to use their credit card to make a number of large purchases early on may benefit from a card with a rate which is initially very low or 0%. Those who wish to use their card for regular purchases may benefit from a credit card which has a low rate for the life of the card. Using our credit card interest repayment calculator may give you indication of which one is most suitable.
Is the cheapest rate the best card to apply for?
The answer to this question depends again on how you plan to use your card. Cards come with many different features and fees. The right mix of these features, fees and interest rates will help you decide which cards will be worthwhile additions to your wallet.