Lexi Webster
The average credit card interest rate in Australia varies depending on the type of card and the type of transaction. The average rate sits around 19.94%, but this can be as low as 8.99% and as high as 23.99%. Cards with rewards schemes tend to have higher interest rates, whereas cards without rewards programs have lower rates. Interest rates are also impacted by whether you are making a purchase or a cash withdrawal, with cash advance rates usually being higher than purchase rates. If you pay your credit card bill in full before the due date, the interest rate becomes less important.
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What You'll Learn
Rewards cards vs. non-rewards cards
The average credit card interest rate in Australia is around 19.94%, according to data from the Reserve Bank of Australia. However, this can vary significantly depending on the type of card and the type of transaction. For example, credit card purchase rates can be as low as 8.99% p.a. or as high as 23.99% p.a.
When deciding between a rewards card and a non-rewards card, it's important to consider the benefits and drawbacks of each. Rewards cards typically offer incentives such as points, cashback, gift cards, and other bonuses. These points can often be redeemed for a range of goods and services or for discounts on things like flights and accommodation. Some rewards programs even allow you to earn points by hitting non-financial targets, such as walking a certain number of steps per day.
However, rewards cards usually come with higher annual fees and interest rates than non-rewards cards. This means that if you don't pay off your balance in full each month, you may end up paying more in interest and fees than the value of the rewards you earn. There may also be caps on the number of points you can earn, and the value of the points can vary across different cards and reward schemes. Additionally, a rewards card may encourage you to overspend in order to earn more points.
On the other hand, non-rewards cards typically have lower interest rates and annual fees. If you don't pay off your credit card bill in full each month, a non-rewards card could be a better option as you would likely pay less in interest.
Ultimately, the decision between a rewards card and a non-rewards card depends on your spending habits and preferences. If you can pay off your credit card bill each month to avoid paying interest, a rewards card may be a good option to earn some extra benefits. However, if you often carry a balance, a non-rewards card with a lower interest rate may be more cost-effective. It's important to compare the features and costs of different cards to find the one that best suits your needs.
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Cash advance rates
A cash advance rate applies when you withdraw money from your credit card or use it for cash-equivalent purchases, such as gambling, money transfers, or loading a travel money card. Cash advance rates are usually higher than purchase rates, and interest is charged from the date of the transaction with no interest-free period.
Credit card cash advances typically attract a 3% to 3.5% fee, in addition to high-interest charges. The fee charged is $4.00 or 3.00% of the transaction amount, whichever is greater (up to a maximum of $300). As well as the fee, you'll also be charged interest on your cash advances, calculated per day and payable each month.
Some credit card providers process bill payments as cash advance transactions, including BPAY payments, utility bills, and government charges such as property rates or ATO bills. Buying cryptocurrency with your credit card is also considered a cash advance transaction.
You can usually find the cash advance rate in the rates and fees information provided by the bank or lender. Your monthly credit card statement will also show the current cash advance interest rate.
It's important to note that cash advances can become quite expensive, especially with frequent use. They are considered a greater risk to lenders than everyday credit card purchases, so a higher interest rate and fees are applied to offset this risk. As such, using a credit card to access cash should typically be a last resort.
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Balance transfer rates
A credit card balance transfer is when you move the amount you owe from one credit card to another. The new interest rate on the transferred balance may be 0% or a special low rate for a limited time, known as the balance transfer rate. This rate usually lasts from six to 36 months, after which it reverts to a higher rate, which may be based on the card's purchase or cash advance rate. This higher rate, known as the revert rate, may be significantly higher than the original interest rate on your previous card.
Some cards offering competitive balance transfer rates in Australia include the ANZ Low Rate Credit Card, which offers 0% interest on balance transfers for 26 months, and the Virgin Australia Velocity Flyer Credit Card, which offers 0% interest on balance transfers for 24 months. The Bankwest Breeze Mastercard also offers a competitive balance transfer rate of 0% for 24 months, followed by a relatively low revert rate of 12.99% p.a.
When considering a balance transfer, it's important to compare rates and fees to ensure you're getting a good deal. Additionally, be aware that some cards set a maximum amount that can be transferred, so you may not be able to transfer your full balance. It's also recommended to cancel your old card after transferring to avoid the temptation to create more debt.
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Instalment rates
Instalment loans are not the only way to avoid paying high interest rates on large purchases. Some credit cards offer interest-free days on purchases, provided you pay your balance in full by the statement due date each month. If you can't pay your balance in full each month, you may want to consider a credit card with a low purchase rate.
If you're someone who can pay off your credit card bill each month, you might want to consider a credit card with rewards. That way, you may get some extra benefits from using your credit card, even after accounting for any annual fees.
On the other hand, if you don't pay off your bill each month, you might be better off with a credit card without a rewards program, as you would likely pay less in interest. The average credit card interest rate for a rewards card was 19.97% in December 2022, while for a non-rewards card, it was 14.27%.
Regardless of the type of credit card you have, it's important to understand the fee structure and set a credit limit that you can realistically pay off every month. Check your credit card statement regularly and set reminders for due dates to ensure you don't incur late fees or additional interest charges.
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Interest-free periods
An interest-free period is a period of time when no interest is charged on a new purchase. Most credit cards offer an interest-free period of up to a certain number of days, which is typically between 44 and 55 days. The interest-free period may automatically apply when you open a new credit card account, and will continue to apply as long as you pay your closing balance in full by the due date each month.
The number of interest-free days is the maximum number of days you won't be charged interest, and depends on when you make your purchase within the statement cycle. For example, if your statement cycle is from November 1-30, with an interest-free period of 55 days, you have until December 25 to repay all purchases within the 30-day cycle, interest-free. In this case, the laptop is 55 days interest-free, while the interest-free period for the shoes purchased on November 30 is only 25 days.
If you don't pay in full, you'll lose your interest-free period on purchases and interest will be charged on your unpaid balance from the payment due date. You will also lose your interest-free period if you only make a minimum repayment. You can regain your interest-free period by paying your account balance in full.
Another option for an interest-free credit card is one with a 0% introductory offer on purchases. These are standard credit cards with a special offer attached. You won't pay interest on purchases for an initial period (current offers range from 6-15 months), but then the card reverts to the standard interest rate. You still need to make the minimum repayment during the interest-free period. If there is an outstanding balance on the card after the interest-free period, you'll start being charged interest.
You can also take advantage of a 0% balance transfer offer, which involves switching the balance of an existing credit card to a new one that offers an interest-free period on the transferred balance for a limited time, usually 6-24 months. The no-interest period applies to the existing balance only, not new purchases.
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Frequently asked questions
The average credit card interest rate in Australia is around 19.94%. However, this varies depending on the type of card and the provider.
Credit card interest rates in Australia are expressed per annum (p.a.) or as the annual percentage rate (APR). The APR can vary depending on the type of transaction, with different APRs for purchases, cash advances, balance transfers and repayment instalment plans.
A purchase rate, also known as a standard rate, is the main interest rate you agree to when signing up for a credit card. It applies to most regular transactions, such as purchases made online or in-store, and bill payments. Purchase rates vary significantly, from as low as 8.99% p.a. to as high as 23.99% p.a.
A cash advance rate is the interest rate charged when you withdraw money from your credit card or use it for cash-equivalent purchases, such as gambling, money transfers, or loading a travel money card. Cash advance rates tend to be higher than purchase rates and rarely benefit from interest-free days.
To avoid paying interest, pay your credit card bill in full on or before the due date. You can also take advantage of interest-free days on purchases if you pay your balance in full by the statement due date each month.
