How to compare and find the best low rate credit card

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:

• promotional interest rates – some cards offer a short-term interest free period, which can be useful for repaying an immediate cost
• standard interest rates – you will want the lowest standard rate you can for your long-term benefits
• balance transfer rate – some cards have an interest free balance transfer period, which assists with repaying existing debt
• cash advance interest rate – which applies to ATM cash withdrawals, foreign currency purchases and gambling. This rate is commonly in excess of 22.00% p.a. and often applies as soon as you make the transaction. Where purchase transactions may have the benefit of an interest free period.

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.