Enjoy low interest rates when you carry a balance and save money on your credit card bills.
A low rate credit card is designed to help you save money on purchases and existing card debt by charging less interest than other credit cards. If you don’t pay your card off in full each month, a low rate card helps keep your interest charges to a minimum. Switching to a card with a lower interest rate can also help you pay your debt faster.
Use this guide to compare low rate credit card features and offers available now and learn how low interest rate cards work so you can find a credit card that is affordable for you.
What is a low interest rate credit card?
Low interest rate cards offer you a lower ongoing interest rate for purchases than standard credit cards. While credit cards in New Zealand typically have interest rates that range from 16.95% to 20.95% per annum (p.a.), low rate cards offer standard variable rates as low as 12.69% p.a. Some cards even offer promotional 0% rates on purchases for a fixed period (you can learn more about these in finder’s guide to 0% purchase credit cards.
A low rate credit card makes sense if you regularly pay with plastic and know you won’t always pay off the balance in full each month. It gives you the flexibility to pay off your balance over time, without the higher interest charges of some other cards.
But if you have a large existing credit card debt and want to pay it off, you may want to consider a balance transfer card instead. If you always pay your balance in full, then a card with a low annual fee or extra benefits such as reward points might make more sense.
How much money can I save with a low rate credit card?
Even a small difference in credit card interest rates can save you a lot of money. Say you have a $2,000 balance on your credit card and you take 6 months to pay it off. With an interest rate of 20% p.a., you would pay $118.30 extra on your debt.
But if you had a low rate card that charged 12% p.a., you would pay $70.60 in interest over the same time period. That’s a saving of $47.70. The bigger your expenditure, the bigger the difference gets. So if you compare credit card rates before you apply, you will be able to find a card that is affordable based on your needs.
How to compare low interest rate credit cards
With a range of low rate credit cards on offer in New Zealand, comparing your options will help you to find one that suits your needs. Here are the key factors you should consider:
Credit card interest rates are usually advertised based on the annual rate that applies to the account, shown as “per annum” or p.a. However, interest on your account is typically calculated daily, based on your existing balance and then charged monthly on the statement due date.
Put simply: the lower the rate, the less interest you will pay. But when it comes to your rates, these factors can all impact on your potential savings and costs:
- Promotional interest rates. Some credit cards give you an introductory low or 0% interest rate for purchases or balance transfers. This can be useful if you have planned purchases or an existing debt you want to pay off. However, you need to keep in mind that when the introductory period ends, a higher percentage rate will then apply.
- Standard interest rate. The “standard” or “revert” rate is the variable interest rate that applies at the end of any introductory 0% period. Depending on the card you choose, this rate could be much higher and not considered a “low rate” option. So always check the standard rate to make sure the card you are applying for provides an ongoing low interest rate.
- Cash advances. The interest rate for cash advances is usually higher than the rate applied to purchases. This rate is charged for transactions such as ATM cash withdrawals, foreign currency purchases and gambling. Cash advances aren’t eligible for interest-free days either.
- Interest-free days. If there is an interest-free period for purchases (and you are eligible for it), interest won’t be calculated for those purchases until after that period ends. However, the interest will apply in full if you don’t pay off the total owed by the due date on your statement. Learn more about how this works in our guide to interest-free days.
Fees and charges
- Annual fee. Try to find a card with a low annual fee, but don’t make this your sole deciding factor. A $0 annual fee isn’t helpful if the base interest rate on purchases is a lot higher. Annual fees can range from $0 for cards with basic features to up to $390 for prestige cards.
- Other fees and charges. Fees may apply when you use your card at an ATM, overseas, online with international retailers or even when you apply for a balance transfer. Make sure you are aware of the relevant charges that apply to your card.
While most low rate credit cards have limited features, more premium cards could offer extra perks. Some of the most popular include:
- Complimentary extras. Gold or platinum low rate credit cards may include perks such as travel insurance, purchase protection insurance or concierge services. If you know you will use these extras, they have the potential to offset the cost of any annual fee you pay.
- Rewards. Most low rate credit cards don’t offer rewards points for your spending, as they are somewhat conflicting propositions. There are currently no New Zealand providers that offer low rate credit cards that earn rewards.
- No international transaction fee. If you plan to use your credit card when you travel overseas, a low rate card that waives foreign transaction fees – such as the Westpac Low Rate Mastercard – could help you save even more money.
Pros and cons of low rate credit cards
- You will pay less interest on purchases, making it easier to manage your credit card debt.
- Many low rate cards also have low annual fees.
- You may be able to combine low rate cards with other features such as balance transfers or zero foreign transaction fees.
- You are less likely to receive reward points and other perks.
- You may not qualify if you have a poor credit history.
- If you opt for a card with a 0% purchase rate, it will only be available for a promotional period.
If you often carry a balance on your credit card, a low interest card could help you save on additional fees and charges. Just remember to consider the other features – such as introductory offers, annual fees, and complimentary extras – to help you find a card that best suits your needs.
How to get a low interest rate credit card
After you have compared your options, applying for a low interest rate credit card is easy. Click the “Go to site” button from the table above and you will be taken to the bank’s secure application page. From there you will need to provide details about yourself, your employment, your financial situation and prove your identity. In order to prove your identity you will usually need your driver’s licence or passport. Applications usually take about 15 minutes and most provide a response within 60 seconds.