For people who tend to accumulate debt on their credit cards, a Low Interest Rate Credit Card can be the best option. These cards gather interest at a slower rate, allowing you more time to pay off your purchases. They also usually feature an interest free period of 55 days, where you can make purchases and only have to pay back the amount that you spent. Low Interest Rate Credit Cards may not be as appealing to people who use their cards less often, as they generally have a higher annual fee to compensate for the lower interest. These cards are ideal for those who have greater usage of their card; the interest gathers more slowly so there is less of a hurry to pay off your balance.
Low Interest Rate Credit Cards have interest rates of around 10%-12% p.a. (per annum) on purchases, compared to other credit cards, with interest rates of around 17%-19%. This is usually higher for direct cash withdrawals. These percentages, also known as APR’s (Annual Percentage Rates), indicate how much interest your spending will accumulate over the course of a year. This amount is compounded every 24 hours as a Daily Percentage Rate, worked out by dividing the Annual Percentage Rate by the amount of days in a year (APR/365).
Interest is the amount of money that you have to pay the back on top of the money that you borrowed. For example, if a bank lends you $500 in credit, and you have to repay them $550, you have paid $50 in interest. Interest accumulates over time; the bank will charge you interest in return for the length of time you have had their money. Interest is an added incentive to keep up to date with your repayments.
You can manage to avoid paying interest by making regular repayments, paying off any credit that you have spent during the interest free period (usually 55 days on a Low Interest Rate Credit Card). This allows you 55 days from the time you make a purchase to pay it off, so that no matter how expensive something may be, you can avoid having to pay extra for it in interest.
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