How to Choose the Best Low Interest Credit Card
Selecting the right low interest credit card can be a game-changer for your financial health. Whether you’re looking to make a big purchase, manage existing debt, or simply want to reduce the interest you pay, a low interest credit card can help you achieve your goals. Here’s a comprehensive guide to help you choose the best low interest credit card for your needs.
What is a Low Interest Credit Card?
A low interest credit card offers a lower-than-average annual percentage rate (APR) on purchases, balance transfers, or both. This can significantly reduce the amount of interest you pay, especially if you tend to carry a balance from month to month.
Key Benefits:
- Lower Interest Costs: Save money on interest charges compared to higher-rate cards.
- Debt Management: Easier to pay down existing debt with lower interest accruing.
- Simplified Finances: Potentially consolidate multiple debts into one lower-interest payment.
Factors to Consider When Choosing a Low Interest Credit Card
1. Annual Percentage Rate (APR)
The APR is the yearly interest rate charged on your outstanding balance. A lower APR means you’ll pay less in interest, making it easier to manage and pay off your debt.
Tips:
- Compare the APRs of different cards. For instance, the Kiwibank Zero Visa offers a competitive 12.90% p.a..
- Check if the APR is fixed or variable. Fixed rates remain the same, while variable rates can change over time.
2. Fees
Low interest credit cards may come with various fees, including annual fees, balance transfer fees, and late payment fees. It’s essential to understand these fees to avoid unexpected costs.
Common Fees:
- Annual Fee: Some low interest cards, like the Co-operative Bank Fair Rate Credit Card, have a low annual fee of $20.
- Balance Transfer Fee: This fee is charged when you transfer a balance from another card. It can be a flat fee or a percentage of the transferred amount.
- Late Payment Fee: Charged if you miss a payment. Always aim to pay on time to avoid this.
3. Balance Transfer Options
If you have existing high-interest debt, a card with a balance transfer offer can be beneficial. These offers typically provide a low or 0% introductory APR on transferred balances for a set period.
Tips:
- Look for cards with a 0% introductory APR on balance transfers. For example, the Westpac Fee Free Mastercard offers 0% for up to 6 months.
- Check the duration of the introductory period and the regular APR after it ends.
4. Interest-Free Period on Purchases
Many low interest credit cards offer an interest-free period on new purchases, usually ranging from 30 to 55 days. This can be helpful if you plan to pay off your balance in full each month.
Example:
- The Kiwibank Zero Visa provides up to 55 days of interest-free on new purchases.
5. Credit Limit
Your credit limit is the maximum amount you can borrow on your card. Ensure the card offers a sufficient limit for your needs without encouraging overspending.
Tips:
- Start with a limit that meets your needs but isn’t too high to avoid the temptation of overspending.
- Some cards allow you to request a credit limit increase after demonstrating responsible use.
Best Practices for Using a Low Interest Credit Card
1. Pay More Than the Minimum
Paying only the minimum amount due can result in high interest costs and prolonged debt repayment. Aim to pay more than the minimum to reduce your balance faster.
2. Avoid New Debt
While a low interest card can help manage existing debt, avoid accumulating new debt. Stick to a budget and use your card responsibly.
3. Monitor Your Spending
Keep track of your spending to ensure you stay within your budget. Many banks offer tools and apps to help you monitor your transactions.
4. Take Advantage of Balance Transfers
If you have high-interest debt, use a balance transfer offer to consolidate and pay down your debt more efficiently. Just be mindful of the balance transfer fee and the duration of the introductory period.
5. Review Your Card Terms Regularly
Credit card terms can change, so review your card’s terms and conditions periodically. Ensure you’re still getting the best deal and consider switching cards if better options become available.
Top Low Interest Credit Cards to Consider
Here are some of the best low interest credit cards available, based on their interest rates, fees, and additional features:
1. Kiwibank Zero Visa
- Interest Rate: 12.90% p.a.
- Annual Fee: $0
- Balance Transfer Offer: 1.99% p.a. for 6 months
- Interest-Free Period: Up to 55 days on new purchases.
2. Co-operative Bank Fair Rate Credit Card
- Interest Rate: 12.95% p.a.
- Annual Fee: $20
- Balance Transfer Offer: Available
- Interest-Free Period: Up to 55 days on new purchases.
3. Westpac Fee Free Mastercard
- Interest Rate: 12.90% p.a.
- Annual Fee: $0
- Balance Transfer Offer: 0% for up to 6 months, then 5.95% for the life of the balance
- Interest-Free Period: Up to 55 days on new purchases.
Last Thing
Choosing the best low interest credit card involves considering several factors, including the APR, fees, balance transfer options, and interest-free periods. By understanding these elements and following best practices, you can select a card that helps you manage your debt effectively and save on interest costs.
Remember, the key to maximising the benefits of a low interest credit card is responsible use. Always aim to pay off your balance in full each month, avoid unnecessary fees, and monitor your spending. With the right card and good financial habits, you can take control of your finances and work towards a debt-free future.