What is a low interest rate credit card?
A low rate credit card is set apart by offering a lower interest rate than standard credit cards. If you’re being charged interest each month because you don’t pay your card off in full, a low interest rate credit card could be the ticket to saving you some money.
In a new world where some credit cards charge up to 30% interest, low rate cards can be a lifesaver.
How much could you save on a low interest credit card?
Here are some examples of how much interest you’d accrue in one month at different interest rates, assuming you didn’t make any extra purchases.
| Balance | Low interest rate: 8.99% | Mid interest rate: 14.99% | High interest rate: 19.99% |
|---|---|---|---|
| $400 | $2.95 | $7.88 | $14.45 |
| $800 | $5.91 | $15.77 | $28.91 |
| $1,200 | $8.86 | $23.65 | $43.37 |
| $1,500 | $11.08 | $29.56 | $54.21 |
With a higher interest rate, you’ll find yourself paying a 389% markup in interest on a $1,500 balance.
What about paying off a credit card balance at low, mid and high rates of interest?
Let’s look at an example of a $2,000 balance with the minimum repayments made each month, at various rates of interest.
| Balance | Interest rate | Total paid | Payment duration |
|---|---|---|---|
| $2,000 | 8.99% | $2,849 | 9 years, 10 months |
| $2,000 | 14.99% | $4,188 | 14 years |
| $2,000 | 19.99% | $7,695 | 24 years, 9 months |
As you can see, the difference between low and high interest rates isn’t just hundreds of dollars, it’s also decades of time. Of course, the best way to treat a credit card is to pay more than the minimum each time, so you’re not spending years paying it with interest as the cherry on top.
Not sure how interest works? Here's a quick recap.
When you have money owing on your credit card (a balance) and you don’t pay it off in full each statement period, you’ll be charged interest. You can find out all about how to calculate interest here, but to make it simple, here’s an example:
Your card has an interest rate of 19.99%. Divide the interest rate by 365 to get the daily rate. In this case, 0.0547%. Whatever your balance is, you’ll be charged 0.0547% daily (this is assuming you don’t buy any new purchases on the card for the month).
Interest rate: 19.99%
Daily rate: 0.0547%
Balance: $2,000
Interest charged for 30 days: $32.82
Interest is added to your balance, so the following month you’ll be paying interest on your balance plus on the interest you accrued the month before. The interest snowball can become difficult to stop.
On top of that, if you have money owing on your card each month, you could lose any interest free days that the card offers. Interest free days are usually 44 to 55 days, giving you time to pay off the card in full and pay no interest at all. If you have a balance on the card, the interest free days are often waived, and you’ll be charged interest immediately.
Low interest rate credit cards might be worth looking at as a way to slow the interest charging cycle.
How do you choose the best low rate credit card for you?
As with any type of credit card, you need to compare all the low rate credit cards if you want to choose the best one for you. We make this process as simple as possible by bringing a huge range of low interest cards together in one place so you can compare them with one click.
Here are some things to look for when you’re comparing low interest rate cards:
Step 1. Compare purchase rates. If you have money owing on your card each month, the interest rate should an important factor in your comparison.
Step 2. Compare annual fees. Work out how much you’ll pay in annual fees, but it’s a good idea to keep the interest rate a priority.
Step 3. Compare features. You will usually find low rate cards – especially those that also have a low annual fee – are low on features. However, saving money on interest should stay top-of-mind, so extras can be thought of as an added bonus.
Step 4. Ask if it’s right for you. Make sure you’re eligible for the card, and consider how well it’ll suit the way you live. Remember, you may need to put extras like rewards on the back-burner for now if you really want to focus on saving money.
Why do some credit cards charge more interest than others?
Credit cards are a business, and interest is one way providers make money. Cards with better features will have higher interest rates and annual fees, so providers can recoup costs.
Fortunately, there are some low interest cards with a few extras to help you save money.
In short, low interest rate credit cards are worth thinking about if you want to have a functional little card with a few benefits and pay only a low interest rate for the privilege.
There may be better options for you if...
✔ you’re great at paying off your balance each month. You might get more value out of a rewards card where you earn points that can be redeemed for travel, retail items and services.
✔ you’re struggling with credit card debt. You could think about a balance transfer where you move your debt to a new card with an interest-free period, so you can pay it down faster.
How do you make the most of a low rate credit card?
Even if the rate is lower than average, you'll still be charged interest each month on any unpaid balance on your credit card.
So, to make the most out of a low rate credit card, pay off as much of your balance as you can each month. If you can budget your repayments and stay on top of your balance, you might then feel you want to try a card that has more features that you want, and not be too concerned about the interest rate because you’ll be paying off your card consistently.
Can you get cards with no interest at all?
Yes! Some cards offer 0% interest on purchases for a certain timeframe. The interest free period is usually somewhere between six months and 2+ years.
However, these 0% interest offers are promotional only. Once the period ends, you'll go back to paying interest.
So, they're a great option if you want time to pay off a big purchase like a couch or a holiday, but not necessarily for long-term spending. You can compare 0% purchase offer credit cards here.
By comparison, low interest cards offer lower rates as an ongoing feature of the card, so you’ll never be surprised by a sudden interest bill on your balance.
Low Interest Rate Credit Cards - Frequently Asked Questions
There’s not really any such thing as the ‘best’ card because it all comes down to how you use it, and what you want to use it for.
If you spend big and you like getting free stuff, a rewards credit card might be a good fit.
If you carry a balance, you might find a low interest card like those listed here, or a 0% purchase rate card works out well.
Or, if you travel a lot, you might want a card with no foreign conversion fees or that rewards you for travelling and overseas spending.
The best kind of card is the one you choose because it’s most compatible with the way you live and spend. Use our easy comparison tool to compare credit cards by their different features and offers to find the best one for you.
When you transfer a balance from one credit card to another with a 0% balance transfer offer, you won’t be charged interest on the amount until the promotional period is over.
What you’ll be charged in interest depends on the card. Most times, a balance transfer jumps back to the revert rate, which is often the cash advance rate (and can be very high).
You’ll have to compare these three things carefully if you’re looking for a low interest rate credit card with a balance transfer offer.
- How long the balance transfer introductory period goes for. The interest free period can be up to 36 months.
- The standard, ongoing interest rate on new purchases. This is the everyday interest rate offered by the card.
- The revert rate after the 0% balance transfer period is over. On our comparison guide, you’ll see a note under the Balance Transfer tab that shows the revert rate.
To give you an example directly from a credit card, the ANZ Low Rate Credit Card comes with a 0% Balance Transfer offer. Its ongoing rate is 12.49%, putting it in the mid-bracket for interest charges. The revert rate for the balance transfer (after the 30 month interest free period) is 20.24% p.a. The card has an annual fee of $59, with the first year free.
The ANZ Low Rate Credit Card is a good example of a card that offers low annual fee, a reasonable interest rate, and a lengthy 0% balance transfer period.
You’ll have to remember that if you carry a balance transfer, you won’t get the interest free days on your card, which means you’ll be charged interest on new purchases right away.
You can compare the best balance transfer offers on our comparison page.
All rates, fees and offers correct at the time of publication as of 02nd November 2021Most credit cards offer a certain number of ‘interest free days’ when you clear your balance the previous month.
So, say your card offers up to 55 days interest free on purchases. The number of days you get interest free depends on when the purchase is within the credit card statement cycle.
If you make a purchase on day one of your statement cycle, you’ll have 55 days before that purchase is pinged with interest. This is because there are 30 days of your statement cycle left, and 25 days until your bill payment is due.
If you make a purchase on day 20 of your statement cycle, you’ll have 35 days before interest starts accruing on that purchase. Ten days of your statement cycle, and 25 days until your bill payment is due.
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