Get some breathing space and financial flexibility by using a low interest rate credit card to cut the amount of interest you pay on purchases when you’re carrying a balance on your account.
Lauren is not into credit card rewards. She doesn’t have the appetite to understand complicated frequent flyer programs. She values simplicity and playing it safe.
The main reason to get a card is for everyday convenience. If she ever carries a balance from one month to the next at least she won’t be paying much interest. Low interest rates equate to low risk and low stress. No surprises.
She easily finds a card on Credit Card Compare that gives her a low interest rate and the lowest possible annual fee too. She applies, gets approved and uses the card for day to day spending. Well played Lauren.
Anyone who doesn’t pay off their balance in full every month and wants the security of a low interest rate charged on the balance. However, if you already have a large balance on your existing card, you would probably do better by choosing a balance transfer credit card, with an offer of a low or 0% interest rate on the transferred balance for an introductory period. You may even be able to find a low interest rate card with a balance transfer offer.
The interest rate that banks use to advertise their credit cards is generally the purchase rate – the interest that is applied to the part of your balance that is for normal purchases and bill payments. Low interest credit cards usually have an interest rate that falls in the range 12%-14% p.a. Other transactions, such as cash advances (and balance transfers if there is no introductory offer) are often set at a different rate, which may be much higher than the purchase rate.
The rate is shown as an annual percentage rate (APR), which is the amount of interest the balance would theoretically attract over the course of a year. The interest is actually calculated on a daily basis with a daily percentage rate, and the amount appears once a month on your credit card statement. You can calculate the daily percentage rate as APR% / 365.
The interest rate starts to come into effect when you have an ongoing balance on your account after the monthly interest-free days (e.g. up to 44 or 55 days) have ended.
A different rate, usually higher, is applied to cash advances, including ATM withdrawals, buying foreign currency, gambling payments and transferring funds from your credit card to a different bank account.
Many banks offer new customers a special interest rate as an introductory offer. This can include a low purchase rate or balance transfer rate, or a combination of the two. These promotions last for a fixed period, usually several months, and when the offer ends the interest reverts to a higher rate, typically the purchase rate or cash advance rate. When you are comparing and selecting a low rate credit card it is important to decide whether you want to take advantage of an introductory offer, or would prefer an ongoing low interest rate.
We have created some other comparison tables for these types of low interest cards:
We have created some other comparison pages for these types of low cost cards:
You can find the pages for these cards in our Features section at the top of this page.
Yes. Just because the interest rate on purchases is relatively low, there’s no guarantee that the cash advance rate will be equally low. So check the cash advance rate as well, if this is a feature you intend to use. The cash advance rate could be as high as 20%+ p.a.
Also be aware of any potential late fees or fees for spending more than your credit limit, both of which can add up very quickly. Late payments can also negatively affect your credit rating.
Yes, there are a few low rate cards (but only a few) that give you some complimentary benefits such as a free bottle of wine or travel insurance. There are even fewer low rate credit cards that let you earn points while you spend and redeem them for rewards. It’s really a trade off between rewards vs cost. Would you rather have a no-frills low cost credit card or have a card with higher interest rates with complimentary benefits and rewards points?
Because the ongoing interest rate is low, most of these cards will charge an annual fee. The annual fee is a mechanism that the banks use to offset the low rate and make some money. But you can still find credit cards with low ongoing interest rates and no annual fees for life, and others with no annual fee for the first year.
Yes. Just because the interest late is low, the banks don’t cut corners on technology or security. Card issuers offer the same high tech and security features on all the cards in their range. So if a bank offers, for example, Google, Apple and Samsung Pay, they will be available on all cards, not just the expensive ones. And if there’s a system for monitoring or preventing potentially fraudulent transactions, it will be applied to every one of the bank’s credit cards, including low interest cards.
