How Do Low Interest Credit Cards Work?

January 10th, 2010

If you don’t know how low interest credit cards work, then now is your chance to find out. This article will show you what to keep an eye out for and how to gage the card according to its rates.

10.99% p.a.

Low interest credit cards offer a lower rate of interest than the average card. You will end up saving money if you cannot pay the monthly balance by choosing this type of card.

If you are the type of person that cannot repay the full balance on your card every month, then low interest credit cards can help you save a lot of money. This is how these credit cards with low interest rates work.

When you make a purchase using a credit card, you are actually borrowing money to pay for an item. When you receive your balance you can choose to repay the full amount, or pay off only some of it. This means that you are borrowing the money for another month and you will have to pay interest on the amount borrowed.

Every card has its own interest-rate. When you first sign up for a card you make an agreement to pay that interest whenever you cannot repay the full amount. Low interest rate credit cards offer a lower than average rate of interest.

Low interest credit cards – what you should look for:

When you are shopping for low interest rate credit cards you should also look at any other fees you may be charged. This way you can make full use of the low interest rate without incurring high fees. Look for the credit card that has the lowest annual percentage rate, (APR).

Some building societies and banks have loyalty offers that give you a lower rate on your low interest credit cards if you are already a customer and have an account with them. Some credit cards with low interest rates also offer reward programs, which can add up very quickly if you use your credit card often.

Find out if there is an annual fee and if so, how much it is. Also, many low interest credit cards offer an introductory rate. These can come in the form of a very low rate, an interest-free period, or the opportunity to transfer the balance from another card over to your new one at 0%, or at a very reduced rate of interest.

You will be given an interest-free period where you will not have pay any interest on your card. This is the amount of time you are given between statements to pay off your balance in full.

Watch for any hidden fees or interest rates that may be charged for specific transactions. The low interest rate is offered for purchases made of goods or services from companies or retailers. Some low interest credit cards do not offer the same rate of interest for cash withdrawals, and you may also have to pay a handling fee.

If you are planning on using your low interest rate credit cards abroad, you may have to pay a transaction fee which is approximately 2.75% of the amount of the transaction.

Low interest rate credit cards – how long the rates remain low:

Since these are not credit cards with an introductory rate, the rates will stay lower than average cards with a higher rate. Since interest rates are variable, your card may be affected if the base rate increases with the RBA. Quite often, building societies and banks will increase interest rates according to any changes, which can increase the rates on your card.

At times the credit card companies can make changes to their products, and the low interest rate credit card you have now could become a credit card with a higher rate in the future. If that happens you can always transfer your balance to a lower rate card at that time.

It is a good idea to always monitor the interest rate you are paying. You can check online for any changes or contact your credit card company directly by phone. Don’t allow yourself to be caught off guard by an increased rate on your low interest credit card.

Editors Choice: Featured Credit Card Deals

	Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
Westpac 55 Day Credit Card	0% for 5 months (reverts to 19.59% )	3.99% for 6 months	$0	21.49%
Citibank Clear Platinum Card	11.99%	2.9% for 12 months	$99	21.74%