Low-interest rate credit cards are attractive bank products for consumers. Plenty of credit cards feature interest rates worth above 20 per cent per annum, which make low-rate cards a more favourable choice. As budget-friendly bank cards, low-interest rate credit cards typically have an interest rate of 14 per cent per annum.
What makes these bank cards more enticing is that some of them even have an interest rate that is below that standard. Hence, consumers usually opt for them when hunting for a new or replacement credit card.
Evaluating the Nature of Low-Rate Credit Cards
Banking institutions or lenders charge their credit cardholders with interest rates. Customers should understand that these fees are for covering the cost of lending credit to them. Moreover, when choosing a bank card, the interest rate could be the most significant consideration credit cardholders can have. It is because this figure tells how much debt clients will gain if they fail in paying off their balances in full. Also, the longer that a credit cardholder takes to settle the interest, the more of it that he will have to pay.
When considering low-interest rate credit cards, consumers should understand that, with these bank products, they will pay less on interest every month. The minimum repayments will differ between banks and credit cards. But some rates are usually in the neighbourhood of 2 to 2.5 per cent of the whole balance. Furthermore, most providers of low-interest credit cards apply a different interest rate if a client utilises his credit card to convert money to a traveller’s cheque or a foreign currency.
Consumers may also encounter a different interest rate in activities such as ATM withdrawals, completion of a balance transfer, or performing cash advance. Therefore, throughout one month, a credit cardholder should try to make smaller repayments. In this manner, he can spread out the cost of his credit card bill over a few pay cycles. This measure is better compared to placing pressure on himself to perform repayments all at once.
6 Typical Fees Associated With Low-Rate Credit Cards
Low-interest rate credit cards can be dependable for consumers who need assistance in getting themselves through the occasional expensive times. These bank products are attractive because some credit cardholders are not always capable of settling their balance monthly.
Nevertheless, consumers should learn about the kinds of charges that they may encounter when they avail of a low-interest credit card. In this way, they can avoid getting unfavourable surprises. Here are some of these fees:
1. Late Payment Fee
A credit cardholder may fail to pay off his entire credit card bill on time. This scenario may lead him to get stung by a late payment fee. Hence, a consumer could get inconvenienced by $30 charge, or even higher. Nevertheless, the necessity to settle such amount is entirely preventable. A credit cardholder can set up automatic monthly deposits for the minimum repayment of his credit card bill. This measure eliminates the need to pay for late payment charges that some low-interest rate credit cards feature.
2. Cash Advance Charge
Consumers should understand that low-rate cards can come with a cash advance fee. This charge works with a credit cardholder having to settle a percentage or upfront fee of the cash advance amount when he makes cash withdrawal. Also, the bank may necessitate him to pay the higher amount.
3. Replacement Fee
When a customer loses his low-interest rate credit card, his lender would typically need him to pay a replacement charge. He should be aware that, on top of this fee, he may also need to settle an emergency card charge if he needs the replacement credit card immediately. Plus, the cost for replacing a low-rate credit card abroad would be more expensive than if the bank product gets misplaced in Australia.
4. Annual Charge
Some low-interest credit cards may have a yearly fee tucked onto them. These charges can be up to $60. Also, low-rate credit cards that are of the platinum edition can charge up to $100 in the annual fee. Consumers who find this charge impractical and unfavourable for their finances can shop around for a low-interest credit card with a more affordable annual fee.
5. Foreign Transaction Fee
Banks generally design low-rate credit cards for domestic use and not for frequent overseas travels. Thus, consumers would expect to settle a foreign exchange charge on their withdrawals or purchases abroad. The standard fee is in the neighbourhood of 3 per cent of the Australian dollar-denominated transaction account.
6. Other Charges
Low-rate credit cards can have other fees. For instance, credit cardholders will need to pay an additional charge for withdrawing funds from an ATM. However, they can avoid getting inconvenienced by these other fees through reading the conditions and terms of their low-rate credit cards. In this way, they can be aware of these other payables without feeling caught off guard later.
Consumers who are searching for a new credit card can benefit from the low-interest rate credit cards available today. Financial institutions’ effective marketing practices can enable these credit cardholders in selecting from a wide range of bank card products available. Low-interest cards can undoubtedly be useful financial arsenals in credit cardholders’ wallets.
Credit cardholders, however, should understand that these bank cards usually come with additional charges. These fees come besides the interest rate they need to settle when failing to pay off their bill every month. Besides, credit cardholders should remember that, over time, interest costs can, indeed, rack up. This fact is true even with low-rate credit cards, and it can be the gateway to a debt trap.
Consumers should also keep in mind that lenders make money with low-interest rate credit cards primarily through their customers’ failure to pay their bills on time. Therefore, potential low-rate cardholders should reflect deeply. Before availing of the attractive bank product, first, they should ask themselves what makes this kind of bank card right for them in the first place.
Second, consumers should perform careful research and due diligence. Third, they should take time to read comparisons. Fourth, it is helpful for these credit cardholders to assess a few essential areas of low-rate credit cards as well, similar to when availing of other kinds of credit cards.
Finally, when availing of a low-interest rate credit card, clients should pay off their bill monthly to avoid the financial inconveniences. Keeping these five considerations in mind can aid consumers in making informed choices and finding the low-rate card most suitable for their requirements. Above all, they can keep potential financial hassles at bay.