Low interest rate credit card or low annual fee with interest free days?
18 April 2008
Credit cards with low interest rates on purchases can be very tempting to people who wish to stay out of debt, but depending on how you use your card, you may be better off with a higher rate. It depends on if you use your card as a line of credit or as an alternative finance option to cash.
For those who use their credit cards as a line of credit, the low interest rate is necessary to reduce the overall cost of the credit. You will need to minimise the cost of spending beyond your income if you are to avoid crippling debt. A card like the St. George Vertigo MasterCard would probably suit your needs, offering an extremely low purchase rate of 10.99% p.a. for $45 per year. This would probably allow you to save money in the long term, despite the somewhat high fee. If you need to use cash advances, though, then the Commonwealth Bank Low Rate Card would be a superior option, as its cash rate is exceptionally reasonable at 13.24% p.a.
If you use your credit card only as an easier means of paying for large purchases or for online shopping, and you repay the entire balance promptly each month, then you would likely be better with a low annual fee card with the full allotment of up to 55 interest free days. You will almost certainly have a higher rate applied to balances left beyond this period, but as long as you remain responsible with your payments you'll only need to pay the annual fee. The Commonwealth Bank Low Fee Card can satisfy this with 55 interest free days for only $24 per year.
Please visit our comparison pages of credit cards with low interest or many interest free days for an excellent range of suitable credit cards.
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