80% of Australians don’t know their credit card interest rate
Yet more than 50% of Australians say a low interest rate is important to them, according to research from CUA.
Only one in five Australians know the exact interest rate they're paying on their credit card, according to a survey commissioned by Credit Union Australia (CUA) in January. Credit cards can be a useful way to free up your cash flow and enjoy extra features like rewards and complimentary insurance. However, attracting interest on your purchases is how you can collect debt and can become expensive.
The lack of awareness around credit card interest rates is especially concerning considering that 92% of credit card customers paid for purchases on plastic over the Christmas period. On average, around 45% of said transactions over the Christmas and New Year period were made using a credit card.
According to the survey, 25% of the 2,000 surveyed expected that it would take 3 months or more to repay the balance, while 6% said they would never pay it off entirely.
Aussies are using their credit cards for more than just Christmas gifts, with one in three participants using theirs to make everyday transactions all year. There's nothing wrong with using your credit card to cover these everyday costs, but it's important that you understand what interest rate you're being charged and aim to pay it off in full each statement period.
It's no surprise that the larger your credit card debt, the more likely you are to feel stressed about your finances. Only 21% of participants said they felt completely in control of their money and those with higher credit card debt were much less likely to feel in control.
How to check your credit card interest rate
If you're unsure what interest rate your credit card is charging, there are a few ways you can find out. You can usually spot these details listed on the credit card issuer's website. You can also find the purchase interest rates clearly listed on the credit card reviews available on Finder.
To give you some context, purchase rates under 14% are considered low whereas rates sitting above 19% are considered high.
It's also important to understand that you'll be charged different interest rates for different types of transactions. As an example, you may be charged 19.99% p.a. for purchases and 21.74% p.a. for cash advances (which includes transactions like ATM withdrawals, gambling transactions and government payments).
What to do if you're struggling to pay off your credit card debt
If you're having trouble clearing your credit card debt because of interest costs, you could consider transferring it to a card with a 0% balance transfer offer. You can transfer one or multiple credit card debts to repay the total amount with no interest for up to 26 months. Not only will you avoid interest costs, but you may also be able to repay your debt faster without the burden of interest.
At the end of the promotional period, any remaining debt from the balance transfer will collect a much higher revert rate. This is why it's important to stick to a repayment plan to clear your debt before the interest-free period ends. These cards sometimes charge annual fees and balance transfer fees, which is also important to factor into your comparison.
According to the research from CUA, 51% of Australians consider a low interest rate an important factor when choosing a card provider. If you're looking for a new credit card but want to avoid high interest rates, you could also compare credit cards with promotional 0% interest rates on purchases or low standard rates.
Want more tips to cut down your card costs? Check out Finder's guide to repaying your credit card debt for more ideas.