A low-interest credit card is a low-rate, low-fee credit card which generally does not include a rewards scheme or other perks. They have lower rates than other credit cards, with purchase rates starting from 7.49%. The low interest rate does not apply when making a cash advance withdrawal.
A low-interest credit card can be used in stores and online, with the lender providing funds for the transaction and then billing you for the balance at the end of the month. The low interest rate can provide a safety net if you can only pay the minimum amount each month.
Most companies will charge you interest that compounds daily. The compounding interest increases your effective annual rate (EAR), which is how much you will actually pay on your credit card when adjusted for compounding interest. This interest payment is due once per month.
You’ll also be asked to make a make the minimum repayment of 2.5% to 3% of the balance owing. If you don’t pay this amount, then you may be liable for a late payment fee and additional charges.
Some low-interest credit cards come with additional benefits such as:
Some cards come with interest-free days while others do not. Some lenders offer up to 55 days interest-free, which can further help you save money on interest payments.
The annual fees for low-interest credit cards are typically lower than gold, platinum, or black cards. You can expect to pay between $29 to $100 per year to use your card.
Other fees that may come with your card include:
The table below shows you how much interest you’d pay if you had a credit card charging you 11.99% per annum with a $2,000 balance over a period of one year. Note that the effective annual rate (EAR) is higher than the purchase rate as it accounts for compounding interest.
|Purchase rate (p.a.)|
|Total amount (interest plus principal)|
|Effective annual rate (EAR)|
To qualify for a low-interest credit card you must meet the following qualifying criteria:
Low-interest credit cards are offered by a variety of different banks and lenders in Australia such as:
The first step toward getting a low-interest credit card is completing an application form. A crucial part of the application process is showing that you have enough income and assets to pay back the credit limit.
You’ll be asked to provide proof of the following:
Some credit cards are approved almost instantly. After you have submitted your details, the card provider will give you a response within 60 seconds of applying. Alternatively, the lender may ask for additional information before approving your application.
Low-interest credit card rates can range between 7.49% and 13.99%, which is significantly lower than other cards. Choosing a card with a low interest rate may help you save money in the long-run, especially if you can only make the minimum repayments.
Low-interest credit cards 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:
Credit limits vary from card to card, with platinum and black cards offering the highest limits with the most amount of fees and benefits.
|Minimum Limit||Maximum Limit|
Here are three reasons why people choose a low-interest credit card.
Some people choose a low-interest credit card for its balance transfer feature. You can transfer your existing credit card balance to a new card that supports a lengthy interest-free period. Some cards offer 0% balance transfer up to a maximum of 18 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 after a certain number of months have passed.
Some credit cards come bundled with travel insurance. This insurance will cover you for a variety of travel situations such as:
Picking a card with travel insurance may save you money and give you peace of mind if you travel frequently. In most cases, the travel insurance will cover you for international travel only, and not domestic trips within Australia.
Some people choose low-interest cards for cheaper interest payments and low annual fees. Low-interest cards are generally easier to understand than those that have more features, which makes them suitable for people who are new to paying with credit or for those who just want an easy to understand option.
Low-interest credit cards have low purchase rates and low fees, and often do not come with a rewards structure. A low-interest card can be useful if you are planning to only use the card for purchases, and are able to repay the borrowed amount in full each month. They are not designed to be used for cash advance withdrawals.
In summary, low-interest credit cards:
Some cards offer 0% APR as an introductory offer. The 0% rate can apply to purchases, balance transfers, or both. You’ll still need to make the minimum payments due on your statement to qualify for 0% APR, and if you don’t you may be charged a penalty rate that is significantly higher than the purchase rate.
The interest rate applies to purchases only and does not include services such as a cash advance or balance transfer.
The minimum repayments vary between lenders and range from 2.5% to 3% of the balance owing.
Low-interest credit cards offer some of the lowest purchase rates, but there may be other fees and charges that make them more expensive. There may be fees for late payment, annual fees, and other penalties.
Money.com.au want to make managing money easy and fun! By giving Australians simple tools so they can make the best decisions they can about their money.
We understand that the world of finance is complex, and offer free, extensive guides on Personal Loans, Car Loans and Business Loans, along with tools like our Budget Planning Spreadsheet to help you better manage and understand personal finance.
Shaun is the founder of Money.com.au and is determined to help people pay as little as possible for financial products. Through education and building world class technology. Previously Shaun co-founded CarLoans.com.au and Lend.