New research from Defence Bank has found that one in three (35 per cent) of credit card holders don’t know their interest rate.
Purchase rates and cash advance rates are one of the biggest costs plaguing cardholders who struggle to pay off their credit card balances in full each month. Not knowing your credit card interest rate creates a significant risk that you may not know enough about your card to prevent falling into debt.
The survey of more than 1000 Australians also found that four out of five respondents who know their interest rate are paying one that is more than 10 per cent.
RateCity research shows that the current average credit card purchase rate is 16.32 per cent. However, there are 17 credit cards (excluding 0 per cent offers) currently advertising interest rates under 10 per cent.
Meaning, if you’re constantly being stung by credit card interest, and struggle to pay off your balance in full each month, it may be worth considering switching to a low-rate credit card.
Defence Bank CEO David Marshall stated that it’s time to “break the cycle of paying unnecessarily high credit card interest rates.”
“Australian consumers need to stop paying 20% for the convenience of a basic credit card, when genuine low-rate options exist for half the cost,” said Mr Marshall.
Here are six credit cards on the RateCity database that charge a purchase rate under 10 per cent:
*Note: Half of the $45 annual fee from the Defence Bank Foundation Visa Card goes to the Defence Bank Foundation which supports Veterans and their mental health.
Source: RateCity.com.au. Data accurate as of 11.01.2020.
Working off your Christmas credit card hangover
The Defence Bank survey also found that:
- One in four credit card holders carry a balance at least sometimes throughout the year;
- Around one in five find it hard to pay their credit card balance after the Christmas period;
- 25% expect to use their credit card more in 2021;
- Four out of five of those who do know their interest rate are paying more than 10%, with some paying more than 20%.
If ditching credit card debt for good is one of your New Year’s financial resolutions, now may be the time to work on your debt plan. There are a few ways you can go about paying down credit card debt, especially if you’re struggling with a Christmas credit card hangover.
- Identify your savings window – many credit cards offer interest-free days, generally 44 to 55. Work out just how long you have from when your purchase was made until this window closes and you begin accruing interest. This is valuable time in which you can chip away at the balance before it grows.
- Make a budget – it’s obvious but reassessing your income and expenses to divert more of your budget towards your debt is arguably the most important step in paying off your credit card balance. Make a budget and stick to it.
- Consider a balance transfer card – Balance transfer credit cards may be a handy financial tool for some cardholders. They allow Aussies struggling with credit card debt to transfer their balances to a new credit card with an introductory, interest free period.