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What is the average credit card interest rate in Australia?
Canstar Research has crunched the numbers to find the average credit card interest rates for all the personal credit cards on our database, as well as two different types of credit cards: cards with a rewards program and those without. The figures are for making purchases using the card—not including any cash advance rates.
- Average credit card interest rate: 17.74%
- Average rewards credit card interest rate: 20.83%
- Average non-rewards credit card interest rate: 14.50%
Source: www.canstar.com.au. Based on unsecured credit cards on Canstar’s database; excluding those with 0% purchase rate.
The biggest difference in interest rate usually comes down to whether you have a credit card that offers rewards points. These tend to have higher interest rates and annual fees than non-rewards cards, likely to offset the cost of the additional perks they offer.
If you’re someone who can pay off your credit card bill each month to avoid paying any interest, then you might be in a position to consider the perks that a credit card with rewards can offer you. That way you may get some extra bonuses from using your credit card once you’ve taken into account any annual fees you pay.
If you’re someone who doesn’t pay off the bill each month, or just pays the minimum repayment amount, then it may be worthwhile to consider a credit card without a rewards program as you’d likely be paying less on interest and fees.
Remember, the rates stated above are only an illustration of the average credit card interest rates. There will be credit cards with higher and lower interest rates available on the market, some offering rewards, special offers and other perks such as complimentary travel insurance, airport lounge access and purchase protection.
You can compare credit cards with Canstar and look at a range of options, including if there are any rewards points offered, the purchase rate of the card and other fees or charges such as annual fees. You can also see which credit cards feature in Canstar’s Star Ratings and Awards.
When considering any credit card product, carefully read the Product Disclosure Statement (PDS), Target Market Determination (TMD), Key Facts Sheet (KFS) and any other relevant documentation.
Do credit card interest rates change?
If you have a credit card you might think the interest rate you’re paying on any outstanding balance would be subject to the same fluctuations as interest rates on other financial products, such as for home loans. You may be relieved to learn that things are a little calmer for credit cards, though the type of card you have can make a difference to the interest rate you’re offered.
While changes in the cash rate set by the Reserve Bank of Australia (RBA) have a direct impact on home loans, there has been little change in the average credit card interest rate charged by providers. This is due to the fact that the cash rate is the interest rate that banks charge each other for borrowing money, whereas credit card interest rates are more likely to be affected by a credit card provider’s own business costs and profit margins.
Most credit cards have a single purchase rate for all borrowers. Occasionally you might come across credit cards that offer special introductory rates, that are then followed by an ongoing rate that applies once the promotional period ends.
However, certain factors influence credit card interest rates, including:
The type of credit card: Whilst there are different types of credit cards with various benefits; premium, rewards and frequent flyer cards tend to have higher interest rates than standard credit cards.
Creditworthiness: Borrowers with higher credit scores may qualify for lower interest rates—if the credit card provider offers them. You can check your credit score for free with Canstar or via the Canstar App.
Market conditions: Credit card interest rates can be affected by economic conditions such as inflation and by a credit card provider’s own business costs and profit margins.
What are the different credit card interest rates?
Interest is charged daily on any outstanding balance, so it’s important to know the different types of credit card interest rates and how they will impact your balance.
What is the purchase rate?
This is the interest rate you pay on purchases made with your credit card, expressed as a variable rate per annum (e.g. 17.74% p.a.).
What is the cash advance rate?
If you use your credit card to withdraw cash from an ATM, you’ll generally be charged a cash advance rate. This rate is usually listed in the product documents for your credit card and is almost always higher than the card’s purchase rate. You may also be charged a flat dollar fee or a fee as a percentage of the transaction. Canstar Research says that this fee could be between $1.50-$5 per transaction or 2%-3.50% of the transaction’s value, whichever is greater.
Interest free days also do not apply to cash advances. It’s important to note that cash-equivalent purchases, such as loading a travel money card, are considered cash advances, with the cash advance rate applying to these transactions.
What is the balance transfer rate?
Credit card providers will often have balance transfer credit cards on offer for customers looking to move their outstanding balances from one credit card to another with a lower interest rate. The balance transfer rate refers to the fee you’ll be charged when moving your balance. This rate can range from 1%-3% of the balance according to Canstar’s database, however, providers will often offer 0% balance transfer interest rates for a set period of time (i.e. six months, 12 months, 24 months etc.) to incentivise customers to switch. Many people choose to use balance transfer credit cards when consolidating debt.
