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Got a credit card? Here’s how to save as the cost of living rises

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Credit card interest rates haven't changed much this year – but taking a closer look at them can lead to big savings.

The latest Reserve Bank of Australia (RBA) data shows the average standard credit card interest rate is 19.94%. It's been that rate since 2019.

In fact, Finder analysis shows the average standard credit card rate has been above 19% for over a decade.

This means credit card rates aren't closely tied to the RBA cash rate decisions that affect variable mortgages each month.

But there is a lot of variation in the interest rates on different credit cards. So, just as refinancing your home loan offers savings, switching credit cards can do the same.

Ways to save on your card

  1. Compare low-rate credit cards
  2. Compare 0% credit cards
  3. Calculate what you could save

As an example, someone paying $2,000 off a card over a year could save around $124 by getting a low rate credit card. That's based on the difference in interest charges between the average 19.94% interest rate and an 8.99% interest rate.

This is a key way to save, as research from Power Retail suggests most people stick to paying with a credit card if that's how they usually pay.

The Power Retail Trajectory Report #50 found that credit cards made up 29% of online purchases, second only to PayPal.

"We did expect to see massive changes in credit card payments and how people pay but it's actually been quite static and stable," Power Retail insights editor Natasha Sholl told Finder.

People's payment methods and their payment behaviours are pretty ingrained. It takes a lot for them to really change how they're paying.”

Natasha Sholl, Power Retail insights editor

So even a small difference in the ongoing interest rate on a credit card can lead to savings.

Interest-free credit card offers

Another way to save on interest (for a set period) is to get a credit card that offers 0% interest on purchases or balance transfers for an introductory period.

For example, a card with a 0% purchase rate offer could save you from paying any interest for up to 20 months.

On a $2,000 purchase, that could mean savings of around $367 in interest charges compared to paying off that balance in 20 months with a 19.94% rate.

Someone with a $5,000 credit card debt could save up to $1,684 in interest with a 0% balance transfer offer, which can last up to 36 months. That's compared to being charged 19.94% interest on the balance and averages out to around $561 in saved interest each year over 3 years.

But at the end of a 0% interest rate period, a higher ongoing rate applies. If you still have a balance at that time, you'll pay interest on it.

Quick ways to see how much you can save

Finder's credit card comparison tables can calculate the potential savings for different credit cards.

For even more detail, a credit card repayment calculator shows you potential costs based on the balance, interest rate and monthly repayments. You can use it to see how much you'll save with a different interest rate – or even with different repayments.

Want a better rate? Compare the latest credit card offers on Finder.

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