Credit Card Interest Australia

By: EconomyWatch Content   Date: 15 February 2010

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In the race to win new customers, credit card companies in Australia adopt varied marketing strategies. For instance, larger companies still preserve their profit margins by adopting non-price marketing strategies. On the other hand, smaller companies typically buy market share through aggressive pricing strategies. Earlier, similar interest rates and fees were applicable. However, owing to increase in competition, interest charges on purchases, cash advances and balance transfers vary.

Credit Card Interest Australia: Types of Credit Card

Based on the interest charged, credit cards can be classified into two types:

 

Interest free days: Cards in this category entail higher interest either from statement date or the day when purchases were made, unless the repayment is made within the interest free period. The associated fees are also high.

 

No ‘interest free’ days : Lower interest is charged from the day when purchases were made. Fees are usually on the lower side.

 

In cash advances, interest becomes applicable from the day money was withdrawn. It is advisable to check terms and conditions of use before applying for a credit card. Also, prefer to get a credit card that charges interest from the statement date.

 

According to Ms Delia Rickard, Deputy Executive Director Consumer Protection of ASIC (Australian Securities and Investment Commission),”The bottom line is that interest-free terms and low-interest credit offers are not designed to help you save, they encourage you to spend more.”

 

Credit Card Interest Australia: Rewards Programs

If you choose a credit card that offers a number of rewards programs, then interest rates are likely to be higher. People who are sure that they would be able to make the full payment within the interest-free period opt for credit cards offering frequent flyer, loyalty and rewards programs. Those unsure of doing so may have to face heavy interest payments.

It is worth noting that you will be paying more as interest than you save through rewards earned if the balance carried over each month on your account is considerable.

 

Credit Card Interest Australia: Zero Interest Credit Card Balance Transfers

A number of banks offer zero or low interest balance transfer credit cards to attract customers. Short terms savings are excellent in case of a ‘Zero’ Interest Balance Transfer. The typical balance transfer rate on a low interest card ranges from 2% to 3% per annum. For instance, Citibank charges around 3% p.a. on its Clear, Silver, Gold and Platinum credit cards.

 


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