How to find yourself a cheap credit card deal

THERE are many credit card deals with interest rates under 10 per cent. This is how you can score the best offer to avoid getting stung by interest charges.

CREDIT card users unable to pay off their debt in full each month are being given some small relief as interest rates on plastic slowly fall.

Customers who are revolvers — those who the banks love the most because they do not pay off their debts in full each month — often get stung by exorbitant interest charges.

But in recent months several lenders including American Express, Bank of us and QBANK have lowered the purchase rates on some of their card deals.

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Now some deals are in the single-digit range with rates as low as 8.99 per cent.

Customers who struggle to wipe monthly debt are certainly not alone.

In the Senate Economic References Committee back in 2015 concerns were raised over some customers never paying off their credit card debt while being stuck on deals with double-digit interest rates.

Financial comparison website Mozo’s spokesman Peter Marshall said it’s great to finally see some rates under 10 per cent.

“There are plenty of cards out there that have lower rates,’’ he said.

“If you are carrying a balance on your card you are much better off transferring the balance to a new card and taking advantage of a zero per cent balance-transfer offer.”

This is when the customer transfers one card debt to another and enjoys a zero per cent honeymoon period provided they make no purchases on the card during this time.

The lowest credit card interest rates on the market at 8.99 per cent.

Figures in the Australian Securities Investments Commission’s latest credit card lending report found in June last year there was $45 billion of card balances outstanding, an increase of $1.2 billion from five years prior.

Mr Marshall said customers should zoom in on the fees and charges on their card to see if they can do better elsewhere.

Calculations by Mozo show that, for a customer carrying the average card debt of $4400 and setting their minimum repayments at 3 per cent of the balance, it would take about 13 years to pay off and would cost them $7012 in interest charges.

This is on a card with the highest interest rate at 24.99 per cent.

But if that same customer had a card with the lowest rate of 8.99 per cent it would take them six years and nine months to repay and cost $1159 in interest.

American Express’ vice president of consumers cards Austin Huntsdale said card customers need to make sure they are on the right product to avoid being badly stung.

“Look at the line of credit you have, do you have a line of credit that is appropriate for your financial situation,’’ he said.

“We offer alerts to customers when you reach a certain portion of your credit limit, so you could set that at anything.”

He suggests if customers are struggling to pay back their card debts to stay in contact with their card issuer who may have a range of repayment plans.

@sophieelsworth

What to look for in credit cards

For those unable to pay off their debts:

— Check the interest rate.

— See if you can avoid an annual fee.

— Number of interest-free days available.

— Length of balance-transfer honeymoon periods (if applicable.)

— What the interest rate reverts to on a BT deal once the honeymoon period ends.

Originally published as How to find yourself a cheap credit card deal