Having a credit card can make life more convenient.
Before you apply for a credit card think about why you want it, and how you are going to pay for it.
You should only apply for a credit card if you can afford the repayments.
If you want to use it to pay off other debts consider whether a personal loan would suit your needs better than a credit card.
If you decide a credit card suits your needs you should be aware that not all credit cards are made equally, so it’s worth shopping around to find the best credit card to suit your needs.
If you regularly don’t pay off the full balance owing on your credit card, or want to pay the balance off over time, you may be able to reduce your interest payments with a credit card that charges a lower interest rate (a low rate credit card).
A good low rate interest card should offer a competitive interest rate and low fees.
Credit card providers tend to keep additional features to a minimum in order to maintain these low rates, so if you’re not looking for these additional features, your best option might be a no-frills credit card.
Here are a few things to look for:
When shopping around for a credit card, the most obvious difference you'll notice is the range of interest rates available between banks.
Interest rates can sometimes be in excess of 22.00% p.a., If you will want to avoid that higher end of the scale, instead, opt for a low interest credit card.
On average a low rate credit card has an interest rate up to 14.99% p.a. This is important if you can't pay the balance off in full each month, with a lower rate meaning you'll be charged less interest.
When comparing interest rates look for:
Look for interest-free days
An interest-free period is a great feature that allows you time to pay for your purchases without paying any extra.
A credit card that gives you a good length of time to pay off the charges – usually somewhere between 30 and 55 days – without interest can be really helpful. This interest-free period rolls around on a recurring basis.
Be careful with Rewards Credit Cards
Credit cards with rewards points attached to them usually have high interest rates and annual fees, so it’s a good idea to work out whether the points are worth the extra payments you may be subject to if you don’t pay off the full balance each month, and that you are able to pay off the monthly balance to avoid paying interest.
ASIC’s Peter Kell 1 suggests avoiding these points schemes. “Try not to base your choice on reward points, no matter how aggressively they’re marketed to you,” he tells Money Smart.
Ask about other fees and charges
There may be other fees and charges incorporated into a credit card. These can include an application fee, annual fee, charges for additional cards, reward program fees, and a late payment fee. Be aware of these before signing up.
Compare the cards
When considering a credit card, ask the supplier for a key fact sheet that gives you the key information you need to compare it with other credit cards, such as the minimum credit limit, the minimum repayment, interest rate on purchases and cash advances, and fees. Each credit card provider publishes a key fact sheet on its websites, which can be a simple way to compare each.
Comparison websites are also handy for an overview of credit cards on offer, however Money Smart recommends going directly to suppliers for more details when you’re doing a comparison.
Check out Australian Unity's Low Rate Visa Credit Card.
Any advice does not take into account your personal needs and financial circumstances and you should consider whether it is appropriate for you and read the relevant Terms and Conditions (including Low Rate Visa Credit Card Conditions of Use), any Product Disclosure Statement (if applicable) and Financial Services Guide before acquiring any product.
Rates stated above are subject to change without notice.
Key facts sheets Refer to Low Rate Visa Credit Card key facts sheet detailing the facts relating to the Low Rate Visa Credit Card
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1 Source: Money Smart on 01.04.2019