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What is a low rate credit card?

A low rate credit card is one that charges a lower interest rate than the market average. The average credit card rate generally sits around 15-17 per cent - and this hasn't shifted too much in the last decade. 

The lowest rates on the market will vary depending on the lender, but Australians looking to keep costs down will typically aim for a credit card under 12 per cent.

With credit card interest rates typically ranging from around 8-25 per cent, choosing a low rate credit card under 24 per cent at a bare minimum could make a big difference to how high your monthly repayments are.

What are the different types of credit card interest?

If you are in the market for a low rate credit card, it’s important to understand the different types of interest rates that can be charged.

  • Purchase rate: This interest rate is charged when you make purchases using your credit card, including bills, groceries and other miscellaneous payments
  • Cash advance rate: This interest rate is charged when you withdraw cash from your credit card, purchase foreign currency or perform international money transfers
  • Promotional or introductory rate: This is the rate offered by a lender for a limited time, as a promotional offer, and usually reverts to a higher rate when the offer expires.
  • Balance transfer rate: Also known as a balance transfer fee, this is the interest rate that lenders will charge when you make a balance transfer from one credit card to another, usually to consolidate debt

How is credit card interest charged?

Credit card interest is charged daily, based on the amount of debt you owe. The amount of interest you may be charged depends on a range of factors, including:

  • Credit card type - Visa, Mastercard or American Express can carry varying interest rates and fees. 
  • Credit card purpose - Platinum cards, rewards credit cards, frequent flyer credit cards and travel credit cards may come with higher interest rates. This is because ongoing costs like this, and annual fees, help to pay for rewards programs, sign-up bonus points, complimentary insurances, like travel insurance, concierge services and more. 

However, if you pay off your debt in full every month, and do not withdraw cash with your card, you will not be charged interest. This is fundamentally the best way to avoid paying purchase rates or cash advance rates. 

Where things can get complex, is in the calculation of interest free periods. A mistake some cardholders make is assuming that their interest-free days start again for every new purchase made. It’s important to remember that your interest is charged according to your billing cycle, not from the first day you make a purchase on the credit card.


Example: How your days interest-free are calculated:

  1. Your credit card has an interest-free period of 55 days; and your billing cycle begins on April 1.
  2. You make a purchase with your credit card on April 10.
  3. The 55-day interest period for that purchase begins on April 1, not April 10.
  4. So your interest-free period is actually only 46 days.

How does a low rate credit card work?

If you only make minimum repayments on your card balance, don’t repay the debt during your interest-free period, or have an outstanding balance at the end of your billing cycle, the lender will charge you interest on your remaining debt.

Similar to a personal loan or a home loan, you are charged interest to pay for the cost of borrowing. However, unlike a personal loan or a home loan, you can avoid paying interest on your credit card by paying off your balance in full every month. 

You can also reduce the interest you are charged by choosing a credit card with a lower than average interest rate. This is where low rate credit cards can come in handy.

Is a low rate credit card the best option?

If you cannot pay off your credit card debt in full, a low rate credit card could be the best option for you. However, if you always clear your balance each statement period, you may be better off with a low fee credit card. 

Disciplined savers may find that card fees are the only ongoing cost charged to their card account. Choosing a card with no annual fee, or no foreign transaction fees, for example, can help to make your credit card more affordable.

Low rate credit cards are often recommended as a first credit card for young Australians due to the lower risk of accruing debt than a higher rate card. Alternatively, young Australians may want to weigh up the benefits and risks of alternative access to credit, such as buy now pay later platforms, such as Afterpay or Zip Pay

Pros and cons of low rate credit cards

Here are some of the benefits and disadvantages of credit cards with low interest rates:Benefits of a low rate credit card

Benefits of a low rate credit card

  • Lower your interest repayments: A low interest rate means you will have lower monthly repayments than a higher rate card, which can lead to large savings
  • Reduce your debt: Transferring credit card debt to a low rate credit card can be an effective way to manage debt, especially if your card has a balance transfer offer. 

Disadvantages of a low rate credit card

  • Fewer perks: Low rate credit cards are usually “no frills” and have have fewer rewards and perks than higher rate cards.
  • Higher fees: Some low rate credit cards will generate returns for the lender through higher fees in other areas, such as balance transfer fees or high annual fees.

What to look out for with low rate credit cards

All credit cards come with various features, terms and conditions that you need to check before you decide to apply. You could have the lowest interest rate on the market, but if you're paying through the nose in fees, this may be redundant. 

Here are a few things to consider if you’re applying for a low rate credit card.

  • Check total cost: Check your card does not charge high fees in other areas that mean the total cost of the low rate credit card is more than one with a slightly higher rate. This includes annual fees, account-keeping fees, foreign transaction fees, late payment fees, fees charged for additional cardholders and more. 
  • Review special offers: Look at whether the low rate is standard, or whether they only offer the low rate for a short period of time, such as the first year, before reverting to a higher rate.
  • Are features or rewards offered?: Credit cards that offer rewards programs, insurance cover, and even balance transfer offers will typically come with higher ongoing costs. 
  • Minimum credit limit: The higher your credit limit, the higher amount of debt you are able to accrue on your card account, regardless of the interest charges. If you max out your card balance, even a low interest rate charge on this could see your debt snowball out of control. 
  • Be careful of rejection: Applying for a credit card, then being rejected due to a low credit score or low income will negatively impact your credit score and could impact your ability to get a credit card or other loan in the future.

To view a credit card's T&Cs, hop on to the card provider's website for more information. You can also read the cards Product Disclosure Statement online to learn more about potential ongoing costs, and any eligibility criteria for your application, or eligible purchases for rewards credit cards.

Frequently asked questions

How does credit card interest work?

Generally, when we talk about credit card interest, we mean the purchase interest rate, which is the interest charged on purchases you make with your credit card.

If you don’t pay your full balance each month (or even if you pay the minimum amount), you are charged interest on all the outstanding transactions and the remaining balance. However, interest is also charged on cash advances, balance transfers, special rate offers and, in some cases, even the fees charged by the company.

The interest rate can vary, depending on the credit card. Some have an interest-free period, otherwise you start paying interest from the day you make a purchase or from the day your monthly statement is issued. So avoid interest by paying the full amount promptly.

What is a balance transfer credit card?

A balance transfer credit card lets you transfer your debt balance from one credit card to another. A balance transfer credit card generally has a 0 per cent interest rate for a set period of time. When you roll your debt balance over to a new credit card, you’ll be able to take advantage of the interest-free period to pay your credit card debt off faster without accruing additional interest charges. If your application is approved, the provider will pay out your old credit card and transfer your debt balance over to the new card. 

Can a pensioner get a credit card?

It is possible to get a credit card as a pensioner. There are some factors to keep in mind, including:

  • Annual income. Look for credit cards with minimum annual income requirements you can meet. 
  • Annual fees. If high fees are a concern for you, opt for a card with a low or $0 annual fee. 
  • Interest rate. Make sure you won’t have any nasty surprises on your credit card bill. Compare cards with a low interest rates to minimise risk.

Which credit card has the highest annual percentage rate?

The credit card market changes all the time, so the credit card with the highest annual percentage rate is also liable to change.

Keep in mind that credit card interest rates are expressed as a yearly rate, or annual percentage rate (APR). A low APR is generally good but also consider:

  • There can be different APR's for each feature of the card (e.g. purchases may have an APR of 14 per cent, while cash advances on same card could have an APR of 17 per cent.
  • Credit cards with a variable rate can change throughout the year, affecting your APR, so check the full details.
  • If you pay your balance in full every month, having the lowest APR is not as important as the other fees associated with the card. However, if you carry a balance from month to month, then you want the lowest APR possible.

How is credit card interest charged?

Your credit card will be charged interest when you don’t pay off the balance on your credit card. Your card provider or bank charges you the individual interest rate that is associated with your card, which is usually between 10 and 20 per cent. 

The interest will be added onto your bill each month or billing period if you don’t pay off the balance, unless you are in an interest-free period.

You will be charged interest on anything that hasn’t been paid for inside the interest-free period. Usually you will receive a notice on your bill or statement saying you will be charged interest so you have some form of notice before you’re charged.

How do you use credit cards?

A credit card can be an easy way to make purchases online, in person or over the phone. When used properly, a credit card can even help you manage your cash flow. But before applying for a credit card, it’s good to know how they work. A credit card is essentially a personal line of credit which lets you buy things and pay for them later. As a card holder, you’ll be given a credit limit and (potentially) charged interest on the money the bank lends you. At the end of each billing period, the bank will send you a statement which shows your outstanding balance and the minimum amount you need to pay back. If you don’t pay back the full balance amount, the bank will begin charging you interest.

Can I transfer money from my American Express credit card to my bank account?

If you’re an American Express credit card customer, you may not be able to transfer money from your credit card to your bank account. However, you may be eligible for cash advances, which involves withdrawing money through an ATM. 

To qualify for a cash advance, you’ll likely have to enrol for American Express Membership Rewards. Consider checking your online credit card account to see if you can withdraw a cash advance and, if so, the fees and charges you’ll incur for this transaction. 

You should remember that cash advances are different from balance transfers, which were available with some American Express credit cards earlier. Balance transfers allow customers to consolidate debt from high-interest credit cards to a credit card offering a lower interest rate. If you only recently applied for an American Express credit card, balance transfers may not be available irrespective of the card you own. 

How do you use a credit card?

Credit cards are a quick and convenient way to pay for items in store, online or over the phone. You can use a credit card as a cashless way to pay for goods or services, both locally and overseas. You can also use a credit card to make a cash advance, which gives you the flexibility to withdraw cash from your credit card account. Because a credit card uses the bank’s funds instead of your own, you will be charged interest on the money you spend – unless you pay off the entire debt within the interest-free period. If you pay the minimum monthly repayment, you will be charged interest. There are many different credit card options on the market, all offering different interest rates and reward options.

How to calculate credit card interest

Credit card interest can quickly turn a manageable balance into unmovable debt. So being able to understand how interest rates translate into dollars is an important skill to acquire.

The common mistake people make is focusing on the credit card’s annual percentage rate (APR), which often sits between 15 and 20 per cent. While the APR does provide a rough idea of how much interest you’ll pay, it’s not entirely accurate.

This is because you actually accrue interest on your balance daily, not annually. So, you need to work out your daily periodic rate (DPR). To do this, divide your card’s APR by the number of days in a year (e.g. 16.9 per cent divided by 365, or 0.05 per cent). You can then apply this figure to the daily balance on your credit card.

How easy is it to get a credit card?

For most Australians, there are no great barriers to applying for and getting approved for a credit card. Here are some points that a lender will consider when assessing your credit card application.

Credit score: A bad credit score is not the be all and end all of your application, but it may stop you being approved for a higher credit limit. If your credit score is less than perfect, apply for the credit limit that you need, rather than the one you want.

Annual income: Most credit cards have minimum annual income requirements. Make sure you’re applying for a card where you meet the minimum.

Age & residency: You need to be at least 18 years old to apply for a credit card in Australia, and most require that you are an Australian citizen or permanent resident. However, there are some credit cards available to temporary residents.

Should I get a credit card?

Once you've compared credit card interest rates and deals and found the right card for you, the actual process of getting a credit card is quite straightforward. You can apply for a credit card online, over the phone or in person at a bank branch. 

What should you do when you lose your credit card?

Losing your credit card is a serious situation, and could land you in financial trouble. Here is a simple guide detailing what to do when you lose your credit card.

Lock you card – Contact your provider and inform them about your lost credit card. From here lock, block or cancel your card.

Keep track of transactions – Look out for unauthorised credit card transactions. Most banks protect against fraudulent transactions.

Address recurring charges – If your card is linked to recurring charges (gym membership, rent, utilities), contact those businesses.

Check credit rate – To ensure you’re not the victim of identity theft, check your credit rating a month or two after you lose your credit card.

What should you do if your credit card is compromised?

Credit card fraud is a serious problem. If your credit card is compromised and you’re wondering what to do, here are a few precautionary steps to take.

Contact you credit provider – Get in touch will your credit card provider. If you feel your card has been compromised, you should be able to lock or block it.

Monitor your accounts – Keep an eye on your credit card accounts. Any unauthorised transactions could be a sign your credit card has been compromised.

Check your credit rating – It’s also important to check your credit rating, to ensure you’re not a victim of identity theft or some other financial mischief.

What should I do if my ANZ credit card has expired?

Your ANZ credit card is considered expired only after the last day of the month and year marked on your card. For instance, if your card’s expiry date reads 03/23, it is valid until 31 March 2023 and expires on 1 April 2023. Typically, you should have received a new credit card by that date, and you won’t have to request a new card. 

Once you get the new card, you should remember to switch any automatic payments you have - such as a utility or mobile phone bill - from your expired credit card to your new credit card. Equally, if you are using CardPay Direct to repay your ANZ credit card debt, you may need to update the credit card account details for that service as well. 

In case the new card doesn’t arrive by the expiry date of your current credit card, you can call ANZ on 13 22 73 to find out the reason and if you need to request an expedited card. Please note that if you were planning to close your credit card account or request a credit card upgrade, you may need to call ANZ at least before the 25th of the month your current credit card expires in, as that’s when they may send you the new credit card.

How to get money from a credit card

You can get money from a credit card, but generally it will cost you.

Withdrawing money from a credit card is called a cash advance, as it operates more as a loan than a simple cash withdrawal. Because it is a loan, you may be charged interest on your cash advance as soon as you make the withdrawal. Interest rates are also usually much higher for cash advances than standard credit card purchases.

In addition to the interest rate, you may also be charged a cash advance fee. This could be a flat rate, or a percentage of your total cash advance. If you are considering a cash advance, make sure to add up how much it will cost you before committing.

How to pay a credit card from another bank

Paying or transferring debt from one lender to the other is called a balance transfer. This involves transferring part or all of the debt from a credit card with one lender to a credit card with another. As part of the process, your new lender will pay out the old lender, so that you now owe the same amount of money but to a new institution.

Many credit card providers offer an interest-free period on balance transfers to help new applicants better handle their debt. During this period, cardholders are not required to pay interest on the debt they brought over from the other card. This can be a great opportunity for consumers to pay off credit card debt with no interest. There are often fees associated with balance transfers; normally, these are a percentage of the amount transferred.

So make sure you read the terms and conditions of the card before transferring any debt across.

How to get a credit card for the first time

A credit card can be a useful financial tool, provided you understand the risks and can meet repayment obligations.

If you’re a credit card first-timer, review your options. Think about what kind of credit card would suit your lifestyle, and compare providers by fees, perks and repayments.

Once you’ve selected a card, it’s time to apply. Credit card applications can generally be completed in store, online or over the phone.

When you apply for a credit card for the first time, you must meet age, residency and income requirements. As proof, you must also provide documentation such as bank account statements.

Does ING increase credit card limits?

You may want to increase your credit card limit for many reasons, such as having access to more spending money. However, if you are using the Orange One credit card issued by ING, you may not be able to do so. 

ING customers can choose a credit limit of their preference when applying for the Orange One credit card. Depending on your financial situation, this limit can be anywhere between $1,000 and $30,000. If you qualify for a Rewards Platinum card, the minimum credit card limit will likely be $6,000. 

Ideally, you should set your credit card limit knowing how much you can afford to repay each month and keep your expenses lower than this level. With most credit cards, you should have the option of requesting a credit card limit increase at a later time, although you will need to qualify for any increase. With an ING credit card, limit increases are out of the question (at the time this was published), which means you may want to apply for a higher credit card limit from the beginning. Remember that you have the option of decreasing your ING credit card limit at a later time.

Does switching credit cards affect credit?

If you’re considering getting a new credit card to replace your existing one, there’s a strong possibility that switching these credit cards will affect your credit score. You might want to apply for a new credit card because it makes financial sense to do so or because there is a better deal on offer, but it could harm your credit score.

Each time you submit an application for a new credit card, a new inquiry is recorded on your credit profile. For lenders, having many credit enquiries on your file can imply that you aren’t reliable or in control of your finances and are desperately seeking credit. So, this is how changing credit cards can affect your credit score.

How to increase your Heritage credit card limit?

Heritage credit card holders can increase their card limits, and typically without any hassles. There are two limits applied to your credit card: your account transfer limit and your credit card limit, each of which has a separate limit.

To increase your Heritage credit card limit, you can contact Heritage on 13 14 22. Unfortunately, you cannot opt to increase your credit card limit online due to security reasons. 

You can, however, request to increase your daily account transfer limit and BPAY® to up to $40,000 per day easily through Heritage Online. To do this,  you'll need to first ensure that your credit card limit is more than $40,000. If it is lower, you’ll need to first ask Heritage for an increase in your credit card limit. 

  • It’s important to note that once you change your credit limit, the daily periodic rate and corresponding annual percentage rate will change as well. This is likely to come into effect on the first day of each billing cycle that begins in March, June, September, and December. The effect of an increase in the annual percentage rate and the daily periodic rate will lead to an increased amount of interest you will have to cover in your monthly payment.