The latest change to credit card interest rates from American Express could see Australians clear their card debts a year and a quarter sooner, saving hundreds of dollars in interest payments, according to RateCity calculations.
The American Express Low Rate Credit Card saw its interest rate fall from 11.99% to 8.99% on 9 April 2018 for existing customers, and from 11 April 2018 for new customers. While this relatively simple card lacks access to the Amex reward programs, it does allow cardholders to enjoy Amex Offers, and no annual fee.
RateCity has calculated that with this interest rate reduction, if an Australian with an average credit card debt of $4198 chose to only make the minimum required repayments, they would clear their debt one year and three months sooner, saving $802 in interest charges.
|Interest charged on 11.99%, min repay of 2.5% or $30||$6501|
|Interest charged on 8.99%, min repay of 2.5% or $30||$5699|
|Time saved||1 year, 3 months|
The rate change from American Express is the latest example of a trend sweeping through Australia’s credit card marketplace, though over the past 14 months, while several lenders have introduced new low rate credit cards, relatively few have cut rates on their existing cards:
- CBA introduced a new “essentials” credit card early in 2018 with a rate of 9.90% (equal 6th lowest on RateCity)
- Westpac introduced a new “lite” credit card in mid 2017 with a rate of 9.90% (equal 6th lowest on RateCity)
- ING introduced a credit card to existing customers with a rate of 11.99% and no annual fee in May 2017
- HSBC introduced a new low rate credit card in February 2017 with a rate of 13.25%
- ANZ cut the rates on their low rate platinum card from 13.49% to 11.49% and their low rate classic card from 13.49% to 12.49%
|Company||Card||Rate||Annual fee||Interest free days (up to)||Perks||Cons|
|American Express||Low Rate||8.99%||$0||55||
0% p.a. on BTs for the first 12 months, purchase protection and refund protection
Late payment fee of $30. Amex not accepted everywhere
Low Rate Visa / McGrath Pink Visa
|8.99%||$40||55||Low rate, low annual fee||Late payment fee of $25|
|Easy Street Credit Union||Easy Low Rate Visa credit card||8.99%||$40||55||Low rate, low annual fee||Late payment fee of $25|
|Bank Australia||Low Rate Visa Credit Card||9.39%||$59||0||Low rate||No interest free days|
|G&C Mutual Bank||Low Rate Visa Credit Card||9.49%||$50||50||Low rate, low annual fee||Cash advances 15.49%|
RateCity money editor, Sally Tindall, described the rate cut from American Express as great news for people looking for a low rate credit card, adding that the market is slowly shifting, and that more lenders are expected to follow suit in the next 12 months.
“Customers should never accept rates as high as 24.99 per cent just for the privilege of using their plastic.”
“If you’re using a high rate card, it’s time to start looking for a new deal. There are plenty of offers on the market with low rates and low annual fees, some even offer rewards.”
It’s important to remember that the credit cards with the lowest interest rates may not always be the best options for every borrower. Consider your finances and read the terms and conditions before making any decisions.