Low Rate Credit Cards

Compare low rate credit cards

While there is a variety of different features that come with different credit cards, for many, the overwhelming priority is to pay the lowest rate possible. if this sounds like you, Infochoice has gathered more than 100 products with a low rate in the comparison table, so you can easily find the card that suits you.

What are low rate credit cards?

Low rate credit cards are those with below average interest rates. RBA data indicates the average credit card rate is north of 17% p.a.

Low-rate credit cards are typically ‘no frill’ options, normally without rewards programs and with low limits. Some providers offer introductory periods of 0% interest – especially when doing a balance transfer – but this would almost always be temporary.

If you are struggling with your credit card repayments, you may choose to move your debt onto a 0% balance transfer card, which will give you a set period where you pay no interest.

Low interest credit cards suit those who prefer not (or aren’t able) to pay off their monthly balance in full. For those who are new to the credit card game, or those who are just looking for a no-frills card to store in their wallet, a low-rate option might suitable.

How does a low rate card work?

A low rate card works the same as any other credit card. You make purchases up to a certain limit over a period of time (typically 30 days). Then at the end of this period, you receive a credit card bill for all of these purchases.

You have a certain amount of time to make this payment without interest, called the interest free period. This is typically 55 days, but with a low-rate card it could be shorter. Anything you don’t pay within this time begins to accrue interest. By using these low rate products though, you minimise this additional expense.

How to compare low interest rate credit cards

If you are in the market for a low interest card, it’s likely you have decided that the interest rate you will pay is the most important thing for you. This implies you might not pay off your balance in-full every billing period. There are several other features to consider though:

Credit Limit

Low rate cards generally come with lower limits, but there may be significant variation between products. It’s sometimes a good idea to take a card with a lower limit, forgoing a bit of spending power in return for a reduced interest rate.

When combined with a low credit limit, a low-rate card can limit the likelihood of a debt spiral, racking up huge bills with huge interest payments.

Promotional interest rates

Some cards offer a promotional period, where you pay very little or even 0% interest for a set period, normally between 6 and 18 months. If you are tempted by one of these products, you should ensure you also consider the rate that the card reverts to after this period is up.

Balance transfer rates

If you are considering moving your balance from one card to another, the new card may offer a balance transfer rate, which is often very low or even 0%. This rate only applies to debt that you bring over from your previous card, and can be a good way to pay off your debt without interest continuing to add up.

However, this reduced rate only applies for a limited time, so if you don’t pay all of your debts before this deadline, they will revert to whatever interest rate you are paying on the new card. There might also be a fee associated with balance transfers, typically 1-2% of the overall balance.

Cash advance rates

Certain credit card transactions incur your cash advance rate rather than the standard interest rate. This applies when you take out cash, for example, or buy foreign currency. These rates are usually much higher than the standard interest rates, so you should consider both.

Interest free period

With most cards, if you pay your bill within a certain period, zero interest will apply. This period is usually between 40 and 55 days. Choosing a card with a longer interest free period allows you more wriggle room to get everything paid without interest beginning to add up.

Annual fee

It’s also worth considering if the low-rate card has an annual fee. If you want a no-frills card that sits in your wallet for most of the year save for a few big expenses, it’s no use paying hundreds of dollars in annual fees for something you barely use. If you can, also look for a card with low or no annual fees.

Additional features

Typically, the lower the interest rate on a card, the less features it will come with. You still may be able to find low interest rate cards with extra features though, so keep an eye out for options with cashback offers, complimentary insurance or rewards programs.

What are the advantages of a low-rate card?

Lower your interest payments

Using a low rate card means you will spend less on interest in the months you are unable to pay all your bills in time compared to other types of cards.

Pay off existing debts quicker

Transferring existing debts to a lower rate card can be a good way to reduce your interest payments. When using a 0% balance transfer offer, you may be able to eliminate interest completely and get on top of your debts.

What are the disadvantages?

Fewer rewards

Cards with low interest rates normally do not offer the range of features on more expensive cards. You may struggle to find low interest cards with many perks. These perks can include anything from airline points, complimentary travel insurance, cashback, and more. If these features are important to you, it could be worth finding another card.

Higher fees

While the interest you pay may be reduced, the card provider may charge higher annual fees to make up for their reduced income.

Lower limit

Generally, the lower the interest rate on a card, the lower the monthly limit will be. If you expect to make several expensive monthly purchases, you may not be able to find a low rate card that allows you to spend to the extent you need. There are usually penalties for exceeding your limit.

Is a low interest rate credit card a good idea?

The ideal credit card for you will depend on your spending habits. Low rate options are suited for those who do not have the ability to consistently pay their credit card debts on time. However, if you usually make all your repayments before the interest free period is up, your priority may be limiting the fees you pay, which are normally higher for low interest cards. There also may be people who fully utilise the range of features attached to higher rate cards, who ultimately find them cheaper.

At the end of the day, you should work out exactly what expenses you are going to use your credit card for, and then find a product suited to that. You should consider how regularly you will be making payments, whether you will be able to pay your bills on time, estimate how much you will spend monthly and whether you will use your card enough to take advantage of any rewards programs.