Why Consider a Lower Interest Rate Credit Card?

Before even applying for a credit card, the first thing that people do is go out and try and find the lowest interest they can find. They want to get low interest credit cards for the off chance that they are unable to pay the credit card company back; they don’t want to be consumed in debt.

A wise choice. However, there are both pros and cons to low interest credit cards. They are not just good and they are not just bad.

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However, before we can understand those two, it is important to understand about some aspects of low interest rate credit cards. First and foremost, these are probably the kind of cards that you’ll want in case of an emergency. It’s useful for emergency purchases and cash advances. However, sometimes the person just wants another credit card and they don’t want to have high interest rates. Regardless of the reason, most of the time, it’s the exact card you want.

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One thing to understand about credit cards is what the APR is. The APR is the annual percentage rate for that particular card. For instance, a 9% APR means that they’ll charge you 9% interest on your balance, calculated daily. For instance,  if you are carrying a $1000 balance with a 9% purchase rate, you will accumulate  $0.25 (rounded to 2 fig) a day in interest.Simply put, if you use the card and then don’t pay it back, they charge 9% (in this example) on whatever remaining balance you have over a year. However, if it’s paid back in full within the grace period (typically 44 or 55 interest free days), there will be no interest tacked on and you’re safe.

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The Pros:

Naturally, a pro of having a low interest credit card is that if you are unable to pay back the loan that is given to you (your monthly balance), you don’t get consumed in debt. A problem is that people spend more than they can afford and then are stuck in a predicament where they can’t afford to pay back their debt. Voila, you’re getting yourself into more and more debt because of interest. With a low interest rate credit card, you are guaranteeing that, although you can’t pay it back, you’re not going to be digging yourself an economic grave with interest.

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The Cons:

There really are no cons to a low interest credit card other than perhaps the rewards that can come from it. Generally however, a lower interest rate will imply a higher annual fee. You’ll therefore need to spend enough on your credit card and accumulate enough cheap interest to compensate.

One of the benefits of having very good credit is you can sign up for better cards. These cards provide gifts. However, if you’re stuck using a LIR card because of your inability to pay back month by month, chances are, there are no rewards for you waiting with each purchase. In essence, a con of a LIR credit card is that you’re not being rewarded for being a good customer.

Overall, if you take the time to really do the research, you’ll figure out what kind of card to get. If you’re good at paying your bill on time, you probably won’t need to get a LIR. Get the gifts. But, if you’re someone who is not very good at making your payments on time, chances are, you’re going to want to apply for a LIR credit card. Regardless of what you do, though, ensure that you read the fine print. That’s very important.

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If you’re interested in a low rate card to save you money on credit card purchases, see the section on Australia’s top leading low interest rate credit cards.

Related posts:

1. How To Lower My Credit Card Payments
2. Australian’s Who Don’t Know their Interest Rate
3. Isn’t it time you Fixed your Interest rate?
4. Save Money With Low Interest Rate Credit Cards
5. How To Minimise Interest Rate Hike Impact
6. Interest Rate Repayment Explanation
7. How Interest Rate Changes Work

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)
St George Vertigo	Editor's Choice: Low Interest Low 2.99% for 6 months (reverts to 11.99%) p.a. interest rate and balance transfer rate, from one of Australia's most respected banks.	2.99% for 6 months (reverts to 11.99%)	20.74%	2.99% for 6 months	$55	55
Coles Group Source MasterCard	The Coles Group Source MasterCard has no annual fee, a 0% p.a. balance transfer offer for 6 months, with a rewards program including savings on fuel and FlyBuys Points	19.74%	21.99%	0% for 6 months	$0	62
Bankwest Zero Platinum MasterCard	Editor's Choice: No Annual Fee Excellent introductory offer with a $0 annual fee for the life of the credit card and a 1.99% p.a. for 9 months on balance transfers	16.99%	16.99%	1.99% for 9 months	$0	55