Why switching to a low rate credit card could save cardholders millions

A recent report by ASIC has revealed that one in six Aussies have fallen into a ‘debt trap’ because of their credit cards.

As of June 2017, the country has a total outstanding credit card debt of $45 billion, $31.7 billion of which was accruing interest.

One of the big reasons ASIC believes Aussies are falling into a debt trap is because they are biting off more than they can chew with their plastic - often opting for cards with higher interest rates.

And according to ASIC, these cardholders could have saved themselves over $621 million in 2016-17, simply by using a low rate credit card with an interest rate of around 13%.

So if you’re now thinking you need to shake up your plastic by switching to a low rate credit card, check out some of these low rate deals below.

What to look for in a low rate credit card

While we all love the sound of a low rate card, there are a number of other features you’ll need to compare if you’re thinking about picking one up, like:

• Low fees - Since you’re already after a budget-friendly card, it makes no sense for you to be paying a hefty annual fee. Aim to find a card that has both a low rate and low annual fee.

• Interest-free days - Something else you might notice are ‘interest-free’ days, which can be a major way to reduce cards costs. If you pay off your balance in full every month, you’ll pay no interest at all on cards that offer an interest-free period.

• Cash advance costs - While some merchants will only accept cash, even though you’ve got a low rate credit card on your side, you should still avoid withdrawing money from ATMs with your plastic.

• Rewards options - There are usually less reward options out there for low rate cards, however there are some that offer perks like gift vouchers, retail discounts and even free flights.

• Introductory offers - Many credit cards will have introductory offers, like 0% interest for a few months. Just keep in mind that most lenders will still require you to pay the minimum every month to keep your interest-free period. Another thing to remember is the revert rate - the rate your card will revert back to once the interest-free period ends -  which you’ll want to make sure is low.