Low interest rate cards offer lower interest rates than the market standard. These cards typically offer less rewards, benefits and other perks. If you regularly have a balance on your credit card, switching to a low rate card could help you save every month. We’ll help you decide if a low interest rate card is right for you.
Low interest rate cards offer a much lower interest rate for purchases than standard credit cards. Credit cards in Singapore typically have interest rates that range from 22% to 29% per annum and interest rates have been going up for most credit cards year on year. However, some cards offer promotional low interest rates of 15 to 18% per annum.
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.
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 S$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’d pay S$118.30 extra on your debt.
But if you had a low rate card that charged 12% p.a., you’d pay S$70.60 in interest over the same time period. That’s a saving of S$47.70. And the bigger your expenditure, the bigger the difference gets.
How to compare low interest rate credit cards
While choosing between credit cards depending on their interest rates, these 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’ll 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 existing debt that you want to pay off. But keep in mind that when the introductory period ends, a higher revert rate will 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 as a “low rate” option. So always check the standard rate to make sure the card you’re 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 also aren’t eligible for interest-free days.
Interest-free days. If there’s an interest-free period for purchases (and you’re eligible for it), interest won’t be calculated for those purchases until after that period ends. However, interest will apply in full if you don’t pay off the total owed by the due date on your statement.
Annual fee. Try to find a card with a low annual fee, but don’t make this your sole deciding factor. A S$0 annual fee isn’t helpful if the base interest rate on purchases is a lot higher. Annual fees typically set you back by S$200 or more. However, most credit cards give waiver from annual fees for a certain period of time or in case of a high usage on the card.
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’re 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 use these extras, they have the potential to offset the cost of any annual fee you pay.
Rewards. Low rate credit cards may not offer rewards points for your spending unlike credit cards that charge the usual interest and offer attractive cashback and rewards.
No international transaction fee.
Pros and cons of low rate cards
Pros
You’ll pay less interest on purchases, making it easier to manage your credit card debt.
Many low rate cards also have low annual fees.
You can often combine low rate cards with other features such as balance transfers or zero foreign transaction fees.
Cons
You’re 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’ll only be available for a promotional period.
If you often carry a balance, a low interest credit 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.
Frequently asked questions on low interest rate credit cards
With so many cards on the market, the individual features have an impact on how well a card is suited to your circumstances. So the card that’s right for you may not be right for someone else. Comparing low interest rate credit cards based on the features you’re looking for will help you find a card for your individual needs.
Most low rate cards offer an interest-free period on purchases, up to a set number of days in each statement period. However, interest-free days are only available for purchases if you pay your balance in full by the due date on each statement.
Yes, you will still have to pay at least the minimum amount for each statement period. Depending on your credit card provider, this is usually around 2-3% of your total balance. If you want to avoid interest charges, you’ll need to may higher repayments to clear your balance before the end of the promotional 0% interest period.
Although the interest rate advertised is a yearly (per annum) number, credit card interest is actually calculated daily based on your average daily balance. It’s then charged to your account at the end of each statement period.
Most low rate credit cards do have an annual fee that you’ll have to pay each year you have the account. However, there are a few cards that offer low rates and S$0 annual fees, as well as some that waive the annual fee in the first year. When you’re comparing low rate cards, you can click on the “annual fee” column to compare them by this cost.
Sally McMullen is Finder's credit cards and frequent flyer editor by day and a music maven by night. She's also one half of the Pocket Money podcast. Her byline can be spotted on Yahoo Finance, Dynamic Business, Financy and Mamamia as well as Music Feeds and Rolling Stone. Sally has a first-class Honours degree in Communications and Media Studies (majoring in Journalism and Professional Writing) from the University of Wollongong.
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