Examine the fine print of any credit card deal
Like with all credit and borrowing decisions, it pays to shop around, check all the details and know exactly what you’re getting before you sign on the dotted line.
Australian household debt averages over $3000 per card, so clearly we are not all making the best decisions when it comes to choosing and comparing credit cards that suit our lifestyles.
- It Starts With You!
It’s important to understand that if the card has an interest-free period and you can be organised enough with your repayments then it doesn’t matter whether the interest rate is 0% or 25% – you never pay any, if you can repay the balance before the due date.
People who know they’re organised and on top of their finances don’t need a low interest rate credit card – they can look for one with a 55-day interest free period and low annual fee.
If, like many, you are unlikely to clear the balance every month and usually rack up a debt then that’s where a high interest rate can become a problem. It’s less of a problem if you pay off more than the suggested minimum monthly repayment; if that’s all you intend to pay then a low interest rate card can certainly benefit you.
- Check the Conditions Of The Deal
Some cards are “introductory” or “honeymoon” offer cards which advertise a low rate for, say, 6 months, before bumping up the rate. Make sure you know what you are getting as the sudden hikes in interest rates can be a big shock for some people who are not vigilant about dates.
If you plan to use your card for ongoing purchases then you want to look for one with an ongoing low rate.
- Compare Credit Card Deals Carefully
Most of the major banks will have a lower interest rate card available – usually around 11%-14% instead of 19%-21%; choose a reputable finance site that allows you to compare credit cards side by side and to sort by interest rate.
Some cards may even offer you a very low rate of a few per cent for 12 months before rising to the 13 or 14% after that; these can be really attractive if you aim to use your card a lot in the next 12 months especially.
If you find deals you like the look of make sure you delve a bit deeper and consider all the features of the card. Sometimes the annual fee is bumped up to partially compensate for the lower interest rate; but you should be able to find a card with an annual fee around $50 or a little more.
- Careful About Balance Transfers
If you are planning to transfer a balance over from another credit card then you may need to take a different tack. There are special cards aimed at doing just this and they may work out better if you are sure you are going to be able to pay off the balance before the balance transfer period expires.
You need to take care with transferring a balance as once the deal expires you will probably be paying the cash advance rate on any existing balance remaining.
If getting a low interest rate credit card is one of your New Year goals then shop around and choose wisely – following the above advice should help you!
