Credit Card Interest Rates

When you use a credit card, you're borrowing money from your account's credit limit. So just like any other loan, interest may be charged on the balance. How and when this interest is charged will have a big impact on what you'll pay to use your card. You can compare low interest credit cards at the bottom of this page.

What are credit card interest rates and how do they work?

Interest rates are a type of fee that's charged when you borrow money. Meaning when you pay back what you owe, you actually end up paying more than what you've borrowed. With credit cards, interest rates are calculated as a percentage of your balance and shown as an annual or per annum figure. For example, a card could have an interest rate of 9.99% p.a. (per annum) or 21.99% p.a.

Most credit cards also charge different interest rates for different types of transactions, with the most common being a rate for purchases and a different, usually higher, rate for cash advances.

How is credit card interest calculated?

The interest rate on credit cards is normally shown as an annual figure. But most credit card companies calculate interest on a daily basis and then add the charges to your account at the end of each statement period (month). To figure out your credit card interest charges, the amount you owe is multiplied by the daily interest rate on your credit card. These daily calculations are then added together at the end of the statement period to get the total interest due.

Types of credit card interest rates

Here are the most common types of interest rates you'll find on credit cards:

• Purchase interest rate. This is the interest you are charged when you use your credit card for making regular purchases and payments in retail outlets or online.
• Cash advance interest rate. You'll be charged the cash advance rate when you use your credit card for withdrawing cash from ATMs or cash equivalent transactions, like buying gift cards.
• Balance transfer interest rate. The balance transfer interest rate is charged when transferring an existing credit card debt to a new card.
• Promotional interest rate. Many credit card companies offer new customers a promotional interest rate for purchases and/or balance transfers. This promotional interest rate is only available for a limited time, with the standard interest rate applying after that. For example, a card may offer you 0% interest on balance transfers for the first 12 months. If you didn't pay off the balance transfer during the first 12 months, the standard rate for balance transfers would apply to the debt.

Even the smallest difference in credit card interest rates can have a huge impact on your account costs. So when you're looking for a new card, make sure you compare both the standard and promotional interest rates to help you find one that suits your needs.

Credit card repayment and interest calculator

You can use this calculator to figure out how much you're paying on your current card, how much you could save with a low rate card, or how to plan your repayments and save yourself the most money.

How are payments allocated on credit cards?

The simple answer is that your repayments will go towards the balance attracting the highest interest first. Anything remaining will go towards the next highest interest balance, and so on down the list.

If you only have one interest rate for your entire balance (say, if you've only used it for purchases), you can use our calculator to figure out how long it would take you to pay off your credit card debt for a given monthly repayment.

Example: Payment allocation with a balance transfer

As you can see, the repayments have gone to the highest interest parts of the debt first. This leaves you with $500 owing after three repayments.

In this example, we've assumed your introductory balance transfer rate applies for the entire time. But if the 0% balance transfer rate ended after the first repayment and went to, say, 21.99% p.a., it would be paid off before the coffee machine purchase.

A brief background on credit card payment allocation

The current payment hierarchy system has been in place since 1 July 2012, following credit card reforms. Previously, repayments would go towards the most recent transaction instead of the highest interest balance.

Two other important reforms were introduced at the same time:

• A ban on over-limit fees, unless you agree to them
• A notification when you go over your credit limit

For more info on credit card reforms, see this page. If you want to learn more about making repayments, this guide takes you through the process. You can also use the repayment calculator to work out a payment plan or look at cards that offer instalment plans with fixed repayment options.

What else do I need to know?

As well as interest rates, make sure you consider the following when you're looking for a new credit card:

• Interest-free days. Many credit cards offer up to a certain number of interest-free days on purchases when you pay your account balance in full by the due date on your statement. For example, up to 55 days interest-free. This gives you a way to avoid interest charges for spending on your credit card.
• Annual fee. Most credit cards charge an annual fee, which could also add to your account balance. Remember to factor this cost in when you're comparing credit cards and also when you're budgeting for interest costs and repayments.
• Other features. Many credit cards offer complimentary extras such as insurance or rewards, which could help offset the cost of the annual fee and interest charges. Just remember to weigh the value of the benefits against potential costs so you can decide if a card is worth it based on your spending habits and goals.

Compare credit cards

If you're looking for a new credit card, you can use our tables to compare your options based on interest rates. Just click on the "Purchase rate" or "Balance transfer rate" column and the table will update to show you cards with the lowest to highest rates.

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We update our data regularly, but information can change between updates. Confirm details with the provider you're interested in before making a decision.

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Name	Purchase rate p.a.	Bonus points	Points per $ spent	Interest-free period	Balance transfer rate p.a.	Annual fee
Bankwest Breeze Classic Mastercard	Purchase rate p.a. 0% for 12 months, then 12.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 12 months with 2% balance transfer fee, then 12.99%	Annual fee $49	Go to siteMore Info Compare	Save with 0% p.a. on purchases and balance transfers for 12 months (with a 2% BT fee).
Westpac Low Rate Card	Purchase rate p.a. 13.74%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 28 months, then 21.49%	Annual fee $59	Go to siteMore Info Compare	Save with a 0% p.a. interest rate on balance transfers for 28 months. Plus, a low 13.74% p.a. purchase interest rate.
Bankwest Breeze Platinum Mastercard	Purchase rate p.a. 0% for 12 months, then 12.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 12 months with 2% balance transfer fee, then 12.99%	Annual fee $69	Go to siteMore Info Compare	Get 0% p.a. interest on purchases and balance transfers for 12 months (with a 2% BT fee). Plus 0% foreign fees and complimentary overseas travel insurance.
Virgin Money No Annual Fee Credit Card	Purchase rate p.a. 0% for 12 months, then 18.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 12 months, then 20.99%	Annual fee $0	Go to siteMore Info Compare	Save with a $0 annual fee and 0% p.a. on balance transfers and purchases for 12 months.
Westpac Low Rate Card - Cashback Offer	Purchase rate p.a. 13.74%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a.	Annual fee $59	Go to siteMore Info Compare	A no-frills card offering up to $350 cashback: $50 each month you make at least $1,000 of eligible purchases for the first 7 months.
Virgin Money Low Rate Credit Card	Purchase rate p.a. 11.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 15 months, then 21.69%	Annual fee $99	Go to siteMore Info Compare	Offers 0% p.a. for 15 months on balance transfers, with no balance transfer fee.
St.George Vertigo Card - Cashback Offer	Purchase rate p.a. 13.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 6.99% for 12 months, then 21.49%	Annual fee $55	Go to siteMore Info Compare	Get up to $400 cashback at eligible supermarkets and petrol stations in the first 180 days. Plus, a low interest rate for purchases.
American Express Low Rate Credit Card	Purchase rate p.a. 10.99%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a.	Annual fee $0	Go to siteMore Info Compare	Offers a low ongoing interest rate of 10.99% p.a. and a $0 annual fee. Plus, complimentary purchase cover.
Citi Rewards Card - Purchase and Balance Transfer Offer Citi Rewards Program	Purchase rate p.a. 0% for 12 months, then 21.49%	Bonus points N/A	Points per $ spent 1	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 12 months, then 22.24%	Annual fee $199	More Info Compare	Save with 0% p.a. on purchases and balance transfers for 12 months with no balance transfer fee.
Credit Union SA Education Community Credit Card	Purchase rate p.a. 0% for 6 months, then 11.49%	Bonus points N/A	Points per $ spent N/A	Interest-free period Up to 55 days on purchases	Balance transfer rate p.a. 0% for 6 months, then 11.49%	Annual fee $0	More Info Compare	Save with an ongoing $0 annual fee and 0% p.a. interest on purchases, balance transfers and cash advances.

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When applying for a credit card, it’s important that you read the fine print to understand all the terms and conditions of your agreement. This way you're prepared to use your credit card in a way that benefits you the most.

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