What is a low-rate credit card in Australia?
Credit card interest rates in Australia start from 0% p.a., but most credit cards with an interest rate below 15% p.a. are generally advertised as being ‘low rate’.
Compared to credit products (like home loans and car loans), these rates probably don’t seem particularly low. But credit cards generally have higher interest rates than other products.
In fact, credit card interest rates often exceed 20% p.a. Higher rates tend to apply to cards that offer more perks to customers, like rewards credit cards and frequent flyer credit cards.
How to get the cheapest credit card
The cheapest credit card in Australia won’t always be the one with the lowest interest rate. In fact, a 0% interest credit card could actually work out more expensive than a card with a 20% interest rate.
It all comes down to how some credit cards work, how you use the card, and the fees.
For example, some no-interest credit cards charge a monthly fee for using the card, with a higher fee for a higher credit limit. Some low-rate credit cards charge a higher annual fee.
On the other hand, a card with a high interest rate but no annual credit card fee might not cost you anything, as long as you pay off the card’s balance in full every month.
Expert's top low-interest credit card pick
Brad Kelly, Money's credit card expert
There are still low interest rate credit card bargains to be had. The G&C Mutual Bank Visa is my favourite. 7.49% p.a. on purchases with up to 50 interest free days, a $50 annual fee, and you can start with a low limit of $1,000 (the max is $75,000). Just don’t use the card for cash advances as the interest rate jumps to more than double – 15.49% p.a.
Brad Kelly, Money's credit card expert
How does a low-interest credit card work?
A low-interest credit card can be used in stores and online, with the lender providing funds (up to a limit) for transactions. You get a bill for the balance spent at the end of the month.
A card with a low interest rate can help you minimise costs, particularly if you can only pay the minimum amount on your bill each month.
What perks do you get with a low rate credit card?
Usually not many, but most low-rate credit cards at lease come with interest-free days (usually up to 55).
Interest-free days mean you don't incur interest on your purchases for a period of time. It makes it possible to pay $0 interest on a low-rate credit card, provided you clear the balance on time each time you get a statement.
Generally the trade-off with a low interest rate credit card is you get fewer other card perks and rewards compared to higher-rate cards.
However, some low-interest credit cards do come with additional benefits such as:
Rewards points (usually capped at a low level)
Complimentary travel insurance
0% balance transfer
Price protection
Purchase protection insurance
Smartphone screen insurance
Extended warranty insurance
0% international credit card transaction fees
How much does a low-interest credit card cost?
The annual fees for low-interest credit cards are typically lower than premium cards like gold, platinum, or black cards.
You can expect to pay between $29 to $100 per year to use your card (the average credit card fee is around $135). Other fees that may come with your card (depending on how you use it) include:
- Foreign currency conversion fee
- Balance transfer fee
- Over limit fee
- Late payment fee
- Cash advance fee (e.g. for withdrawing cash)
- Dishonour of direct credit fee
- Replacement card fee
Who can qualify for a low-interest credit card?
To qualify for a low-interest credit card you must meet the following qualifying criteria:
- Be over 18 years of age
- Be an Australian citizen or permanent resident
- Have a good credit rating
- Not be bankrupt
Before applying for a credit card it’s a good idea to do a free credit score check to make sure you’re in a good position to be approved.
Note, the eligibility criteria will be different for low-rate business credit cards and corporate credit cards.
What are the different types of credit card interest rate?
Purchase rate
This is the rate that most commonly applies, as it’s what’s charged to any in-store or online purchases and bill payments.
Cash advance rate
This is the rate (usually higher than the purchase rate) charged for withdrawing cash from an ATM, or making cash transfer from your credit card account.
Balance transfer rate
This is the special introductory interest rate offered on credit card balance transfers. This rate applies to the transferred balance only and for a limited time, after which the card’s purchase rate usually kicks in.
Introductory rate
Some cards come with a special introductory offer rate. This rate can make certain cards appear to be cheap, low-interest credit card options. But a higher interest rate inevitably comes into effect when the special rate lapses.
What is the credit limit on a low rate credit card?
Low-interest credit cards generally have a minimum credit amount of $500, and a maximum credit limit of $100,000. The amount of credit that you can access from a lender is determined by your:
- Income
- Credit score
- Overall financial health
Credit limits vary from card to card, with platinum and black cards offering the highest limits with the most benefits but higher fees.
Top 3 uses for a low-interest credit card
1
Balance transfers
Some people choose a low-interest credit card in order to transfer the balance of an existing credit card to a new card offering a special no-interest period.
Some cards offer 0% balance transfer up to a maximum of 28 months, which can save you on interest payments if you have a balance owing on your credit card.
Something to keep in mind with balance transfers is the balance transfer revert rate, which can be significantly higher than the standard purchase rate.
The card will automatically revert to this higher rate when the intro offer period ends.
2
Minimising ongoing interest costs
For people who anticipate carrying a balance on their credit card from time to time, a low-rate card may be an option.
Instead of going for a rewards credit card offering perks, a low-rate interest card will give the same access to credit, but with much lower interest costs.
For example, if you need to make a large one-off purchase, using your low rate credit card and paying it off over a few months will likely be more simpler than applying for a personal loan.
However, it could work out very expensive if you only make the minimum payment each month. Even if you have a low-interest card.
3
Access to certain perks
Low-interest rate credit cards rarely come stacked with features, perks and points, but some do offer a level of rewards.
This could include limited point-earning capacity, and insurance to cover the purchases you make using your card, or even credit card travel insurance.
If you're looking for perks without the interest, a charge card is another option. Charge cards do not incur interest but the balance must be paid off in full every month.
How to apply for a low-rate credit card in Australia
The first step toward getting a low-interest credit card is completing an application form.
You’ll be asked to provide proof that you earn enough income to pay back the credit based on your approved limit.
- Income
- Employment details
- Assets and liabilities
- Expenses
Some credit card applications are approved almost instantly. After you submit your details, the card provider will give you a response within 60 seconds.
Alternatively, the lender may ask for additional information before approving your application.
Who offers low rate credit cards in Australia?
- American Express
- Australian Military Bank
- Auswide Bank
- Bank of us
- BankVic
- Bendigo Bank
- BOQ
- Community First Bank
- G&C Mutual Bank
- Greater Bank
- Heritage Bank
- HSBC
- MOVE Bank
- NAB
- Northern Inland CU
- People’s Choice
- Summerland Credit Union
- Teachers Mutual Bank
- Virgin Money
- ANZ
- Australian Mutual Bank
- Bank of Melbourne
- BankSA
- Bankwest
- Beyond Bank
- Coles
- Defence Bank
- Geelong Bank
- Great Southern Bank
- Horizon Bank
- Hume Bank
- ME Bank
- Newcastle Permanent
- Qudos Bank
- St.George Bank
- Suncorp Bank
- UniBank
- Westpac
