American Express cuts credit card interest rates

American Express cuts credit card interest rates

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
Money saved $802
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

Community First Credit Union

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. 

Did you find this helpful? Why not share this news?

Advertisement

RateCity

Money Health Newsletter

Subscribe for news, tips and expert opinions to help you make smarter financial decisions

By signing up, you agree to the ratecity.com.au Privacy & Cookies Policy and Terms of Use, Disclaimer & Privacy Policy

Advertisement

Learn more about credit cards

Current Interest Rate

This is the current interest rate on your existing credit card.

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.

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.

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.

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 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.

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 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. 

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.

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 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.

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.

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.

How do you apply for a credit card?

You can apply for a credit card online, over the phone or in person at the bank. Once you’ve compared the current credit card offers, the application process is quick and easy. Before you get your application started, you’ll need to gather your personal information like proof of ID, payslips and bank statements, proof of employment and details of your income, assets and liabilities. To be eligible for a credit card, you’ll need to be an Australian citizen over 18 and earn a minimum of $15,000 each year. Once you’ve applied for a credit card, you should get a response fairly instantly. If your credit card application has been approved, you should receive a welcome pack with your new credit card within 10-15 days.