The level of credit card debt held by Australians was brought into focus recently by a 2018 report from the financial services regulator ASIC. It found that nearly 1 in 5 Australian consumers are struggling with credit card debt.
However, the report suggested that these consumers could have saved themselves a collective $621 million in 2016-17 by opting for a lower rate card of 13% or below.
With several options on Canstar’s database below the 9% mark, now could be a good time to compare some of the lowest interest rate credit cards on the market.
If you want to learn more about how low rate credit cards work and to get an idea of how they can stack up against other kinds of credit cards, read on.
Low rate credit cards on Canstar
If you’re in the market for a new card, the table below displays a snapshot of low rate credit cards on Canstar’s database, sorted by purchase rate (lowest to highest) then by provider name (A-Z). The results are based on a monthly spend of $1,000 ($12,000 annually). Before committing to a particular credit card, check upfront with your provider and read the terms and conditions to confirm the purchase rate you will be offered, and whether the product as a whole meets your needs.
To see the full list of low rate credit cards on Canstar, click here.
What are low rate credit cards?
Low rate credit cards typically come with lower interest rates than other types of cards, with some on our database as low as 6.64% to 8.99% p.a. Keep in mind, though, that low rate credit cards are generally no frills and tend to not include the rewards programs, perks and bonuses that premium cards may offer.
According to Canstar Research, as at August 2018, the average non-rewards card purchase rate on our database is 13.84% p.a., while the highest is 24.99% p.a. So if you were to take out a card with a purchase interest rate below 9%, you’d be paying considerably less interest than the average card. Some cards even offer introductory rates of 0%, before switching to a higher rate later on. When deciding on a suitable card, it could be a good idea to consider whether the card as a whole is right for you, including the rate of interest that would apply over the long term and not just the introductory rate that’s being offered.
Looking for a credit card with a 0% introductory purchase rate? The table below displays a snapshot of some of the 0% introductory offer cards on Canstar’s database with links to providers’ websites, sorted by provider name (A-Z). Results are based on a monthly spend of $1,000. Before committing to a particular credit card, check upfront with your provider and read the terms and conditions to confirm the interest rates and fees that apply to the card, and whether it meets your needs.
In some cases, low rate credit cards may be suitable for customers who want to transfer an existing balance to a new card to save on interest, or for those who just want a no-frills product for their everyday transactions. Using ASIC’s credit card calculator, a $2,000 credit card debt charged at 24.99% interest per annum, while making the minimum monthly repayments, could cost you $6,253 in interest over 23 years and six months. Here, the minimum repayment is $52 for the first month. Minimum repayments are calculated as a percentage of your closing balance so they will decrease in line with your balance over time.
In contrast, a 6.64% p.a. purchase rate for that same debt with minimum repayments ($41 for the first month) would mean you’d pay $553 in interest over 8 years and 10 months. This would more than halves the amount of time it will take to clear your balance.
Pros and cons of low rate credit cards
Here are some of the pros and cons of low rate credit cards:
Low rate credit cards: pros and cons
5-Star low rate credit cards
The following low rate credit cards received a 5-Star Rating in October 2018:
|American Express||Low Rate Credit Card|
|Australian Unity||Low Rate Visa|
|Auswide Bank||Low Rate Visa|
|Bank Australia||Low Rate Visa Credit Card|
|Bank First||Visa Platinum Credit Card|
|Bank of us||Visa Credit Card|
|Community First CU||Low Rate Black Visa|
|Community First CU||McGrath Pink Visa|
|Easy Street Fin Services||Easy Low Rate Visa|
|Endeavour Mutual Bank||Visa Credit Card|
|G&C Mutual Bank||Low Rate Visa Credit Card|
|Nexus Mutual||Low Rate Platinum Credit Card|
|Northern Inland CU||Low Rate Visa Credit Card|
|Police Bank||Visa Credit Card|
|SCU||Low Rate Visa Credit Card|
|Teachers Mutual Bank||Credit Card|
|UniBank||Visa Credit Card|
|Woolworths Employees CU||Low Rate Credit Card|
Source: Canstar Credit Cards Star Ratings, October 2018.
How to compare low rate credit cards
When searching for a low rate credit card, there a few factors that could be worth keeping in mind:
- The introductory purchase rate and revert rate (the purchase rate your card reverts to after any introductory period, if applicable) on the card
- The fees, such as any annual fees, late payment fees or balance transfer fees
- Whether the card has any perks or bonus features
- If you will be making a balance transfer onto the card, the promotional balance transfer rate, how long it lasts for and what it will revert to
- The number of interest-free days – our database shows the maximum for credit cards is currently 90, while on the other hand, some low rate cards have 0.
To compare credit cards based on these factors and more, you can use Canstar’s comparison tables: