Low Interest Credit Cards

The interest rate on a credit card is often the most important factor. We help you compare low interest credit cards.

Low interest rate credit cards are excellent for those trying to manage their debt or pare down monthly expenses. These credit cards offer the basic perks and protections that are standard to competitive credit cards but focus more on keeping your finance charges low in lieu of showering you with rewards and points you may never use. Low interest rate credit cards make great starter cards or cost-effective alternatives that'll help you pay down your debt.

Low Interest Credit Card Comparison Table

What is a low interest credit card?

A low interest credit card can come in various guises, but what we usually think of when we talk about one is a credit card that has a low ongoing rate of interest. This is the Annual Percentage Rate (APR) that applies to purchases, which is usually a lot lower than the interest rate applying to any cash transactions made on the card.

The point of a low interest credit card is to allow the customer to keep an unpaid balance on their account and not suffer a high rate of interest on it. It's a simple concept and usually the key driver when someone is looking at taking a credit card to keep their outgoings to a minimum. These cards are best-suited to people whose spending is such that they usually fail to clear their account balance in full each month, or who have the odd month or two here and there when this may happen. A low rate of interest keeps the charges down on the unpaid part of the balance.

Low Interest Credit Card Comparison

By doing a credit card comparison you can find low interest rate credit cards to suit your budget. These cards reduce your minimum payments and the cost of a revolving balance. If you already have high rate cards you can do a balance transfer to a low interest card to start saving money right away. Doing a credit card comparison of low interest rate cards allows you to easily see how much money you can save with one of these cards. Interest fees can be incredibly costly to credit card owners over the period of time it takes to pay off a debt. With a low interest credit card you are able to significantly reduce the amount of money you spend on interest. This makes purchases more affordable and reduces the amount of your monthly payments.

The benefits of low interest cards

• If you can't pay off the balance on your card every month then you should have a card with a low interest rate to make sure that you are not overwhelmed with high rates that only get paid to the bank. You will save money on a long-term basis.
• You can reduce your repayments and credit card balances when using low interest cards, and if you have a card that charges more than a 15% rate of interest, then you should do a transfer balance to a card with a lower rate to help pay it off faster.
• Your credit card balance will stay lower due to these low rates which makes it more affordable for you to spend on your credit card.

Is a low interest credit card right for me?

That will depend on exactly how you use your credit card and especially how you deal with your balance at the end of the month. If you nearly always pay off your balance in full each month and only occasionally carry a few dollars over into the next month, then a low rate of interest won't be of much importance. Far more useful would be a credit card that does not charge an annual fee, but may have a higher rate of purchase interest. Doing a comprehensive credit card comparison will help you find the right low interest credit card.

If you do require a low interest credit card, then you should be looking for one that is also good in other areas. Although this may sound like a big ask, it isn't. Competition in the marketplace is sufficiently healthy that there are some excellent credit cards that offer a low rate of interest, a great balance transfer rate, and a very reasonable annual fee. It is certainly not an either/or situation with low interest credit cards, which makes the decision to apply for one very much easier because you'll know you are not compromising in other areas.

Define low interest

For an ongoing purchase interest rate, anything close to 10% is very good. Rates rise to around 20% on some credit cards, especially some of the Platinum-level cards, and on some of the better rewards cards. Do make sure that a really low interest rate is not cancelled out by a less attractive feature elsewhere, because remember that it is not necessary to compromise on this.

Types of low interest credit card

The ongoing low purchase interest rate - This is the low interest credit card we've already discussed. This is a workaday credit card that is good for regular use and that should serve your purpose for years ahead. The interest rate is set an an ongoing feature, and not some special time-limited offer. For anyone whose spending is irregular and who finds they have some clear months and some where their balance remains unpaid, this is the ideal credit card.

The low interest balance transfer - This type of low interest credit card is designed to allow for a balance transfer to be made from a credit card with another provider. If a debt has built up on an existing credit card that is being hit by a high rate of interest, then a balance transfer to a card with a lower rate may save you hundreds of dollars, or even more. The rates for such balance transfers vary according to the length of time the offer extends for - as the vast majority of these are introductory deals that do not last indefinitely. Six-month deals can be found as low as 0%, and twelve-month deals are available from 2%. You will also find the odd five- or nine-month deal depending on how the providers are feeling, and what other features exist on the card. The balance transfer deal that is set indefinitely is the one that applies until the transfer is paid off. These vary around the 5% to 7% mark, and they are mostly to be found on Platinum-level credit cards. Whichever of the shorter periods you choose on such a low interest credit card, it must be long enough to clear your balance before the regular rate kicks back in, especially if this is on the high side.

The introductory low purchase interest rate - As with the balance transfer card, this low interest credit card offers a low rate within a certain period following the credit card account being opened, but on purchases rather than transferred balances. Offer periods are rarely more than six months on these. You may find this offer in combination with a balance transfer offer. If so, these only work well together if both offer periods run concurrently. If not, then you could succumb to the order of payments rule (coming up), where your cheapest debt is paid off first, leaving your more expensive debt to build interest unimpeded.

Key points with a low interest balance transfer credit card

If you choose a low interest credit card of this type, there are certain points to watch out for:

The revert-to rate - This is the interest rate that will hit any unpaid part of the transfer once the offer period has expired. More often than not this is the regular purchase interest rate, but you should always check the fine print to make sure the revert-to rate is not actually the cash advance rate, which is usually around 20%. That's not a good rate to have descend on any amount of debt.

The order of payments - This is the rule that says a credit card company will always use your repayments to clear your cheapest debts first. This is fine so long as your low interest credit card only has the balance transfer on it. However, if you also make purchases on the card, these will then sit accruing the normal purchase interest rate untouched until the transfer has been completely cleared. Failing to take heed of this can seriously undermine the whole point of making a balance transfer, because what you save on the transfer you lose on your purchases.

95% of your credit limit - This refers to the fact that you can only transfer a debt up to the value of 95% of your new credit limit. As low interest credit cards generally charge an annual fee, you may not get full value for money if you have to leave a good portion of your debt behind on your old credit card.

Pitfalls of a regular low interest credit card

These are great cards and there is nothing to be fearful of, except perhaps your own lax attitude towards spending and repayment. Having a low interest credit card should not be seen as a green light to go ahead and overspend believing the low interest rate will save you any heartache. Remember that even the lowest regular rate will still put 10% interest on an unpaid balance. Also bear in mind that cash transaction such as ATM withdrawals, gambling transactions, buying foreign currency or traveller's cheques are all excluded from the terms of the low interest credit card. These are always charged at a higher rate of around 20%, and do not enjoy any interest-free days as your purchases do when your balance has been cleared the previous month.

Which low interest credit cards lead the pack?

There are a number of contenders, but to give you an idea of how good things can get, you should be taking a look at the Bankwest Breeze MasterCard. This offers a regular interest rate of 10.99% p.a., a balance transfer rate of 4.99% p.a. for 12 months, and an annual fee of just $69.

The St.George Vertigo is also a great choice, with an introductory offer on balance transfers of 0.99% p.a. for 12 months and purchases of 13.24% p.a., as well as an annual fee of only $55.

The Aussie MasterCard has the same introductory deal on balance transfers and purchases as the Vertigo, but with a revert-to rate of 9.99% p.a. for 12 months (reverts to 13.29% p.a.) and an annual fee of $49.

For the more prestigious low interest credit card you could try the Citibank Clear Platinum, which boasts a fantastic regular rate of 11.99% p.a., 2.9% p.a. for 12 months on balance transfers, and a special offer on the annual fee in the first year of $99.

Save money by using low interest cards

You will save a lot more money by using low interest cards instead of credit cards with drastically high interest rates.

If a person makes a $1,000 purchase on his low rate card with a rate of interest of 10%p.a, and it takes him a year to pay off his purchase, then he would have to repay $1100. $100 of that would be interest and his percentage rate would be 0.028% which is 10/365. If he repaid it 50 days later then his percentage rate would be 0.027% and he would have to pay $13.70 in interest.

Checklist

When you do start searching around and comparing low interest credit cards, you need to keep your wits about you and make sure that you take all the features of the cards you find into account. These are the main points to keep an eye on:

• The regular purchase interest rate
• The cash advance rate
• Any introductory interest rates on purchases or balance transfers
• The annual fee
• The number of interest-free days (usually 55)
• The rewards scheme, if there is one
• Any fees and charges and when they might apply

Unless you are specifically searching for a different type of credit card, such as one with a zero fee (if you clear your balance each month), or a special rewards credit card, then a low interest credit card should really be the main item on your agenda, especially as there are some that exist that mean you do not have to make sacrifices in other areas. Just remember to always read the terms and conditions to make sure you know exactly what you are getting into.