Low interest rate credit cards are becoming increasingly popular in our credit loving society. Not only do they enable consumers to make purchases at a lower rate of interest but they also make it possible to pay off a credit card balance quicker. While these cards are really handy if used correctly, there are a few things you need to be aware of before pushing the “Apply Now” button.

What is a low interest rate credit card and how can it help you?

The idea behind a low interest rate credit card is pretty simple. Each time you use your credit card to make a purchase or cash advance, you’re charged daily interest. This interest charge is the main way your bank or financial institution can generate revenue from loaning you money. Low rate credit cards charge interest at rates ranging from 11% to 15% per annum, while standard rates could be 16% and higher.

A lower rate means that people who make regular repayments can pay off a bigger chunk of the actual balance of the card, rather than the interest component. In theory, if used correctly, a low rate credit card can save you money. A low rate credit card may be ideal for you if:

• You’re struggling to make a dent in your credit card balance despite making regular payments.
• You often use your card to make purchases

Check the fees

You may be charged a range of fees associated with your low rate credit card. Make sure you’re aware of these charges before applying. Some of the different types of fees you may be charged include:

• An annual fee
• Balance fee
• Missed payment fee
• Over-limit fee
• Foreign transaction fee
• Cash advance fee

Introductory rate vs. ongoing rate

It’s becoming more common for banks to advertise special introductory rates to entice new applicants to sign up. 0% interest rate offers are proving popular with consumers that are keen to pay off the debt they’re carrying. While these offers are enticing, you need to make sure you know when the introductory rate will end and what the ongoing rate will be.

Not all transactions are the same

A lot of people have the misconception that every transaction they make on their low interest rate credit card will attract the same low rate of interest. This isn’t so. In the majority of cases, purchases attract a different rate of interest than cash advances, balance transfers and even foreign purchases. Read the fine print (usually contained within the product disclosure statement) and find out the different interest rates you’ll be charged when using your card.

Low interest rate credit cards can be really handy for consumers who want to save money on interest charges while repaying their balance. If you do your homework by comparing rates and features, you’re sure to find a card that can work for you.

Interested in finding a low interest rate credit card that can save you money? Check out our comprehensive list from Australia’s best financial lenders.