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1.1. Interest rates

Interest rates are a fundamental part of credit card accounts, outlining the amount of interest you will be charged per annum (p.a.). Most credit cards have three standard interest rates you will need to know:

  1. Purchase rate: When you pay for something with your credit card and don’t pay it off, the purchase rate will be applied to the balance.
    This is the most common interest rate and the one you will usually see advertised when you look at credit cards. Standard purchase rates can range from 10% p.a. to 21.99% depending on the card, with the average purchase rate for a standard credit card recorded as 19.75% p.a. in September 2015. For cards with ongoing low interest rates, the average is 13.05% p.a.
  2. Cash advance rate: A cash advance is when you use your credit card to withdraw money from an ATM or at the checkout. Providers consider this feature very different to standard purchases, so they charge a higher interest rate (and a cash advance fee). The cash advance rate is over 20% for most credit cards in Australia and is always applied from the day you withdraw money.
  3. Balance transfer rate: This interest rate is only relevant when you decide to move debt from an existing card to a new card. When the introductory period on the new card ends, the low interest rate will revert to the standard balance transfer rate. Usually this is the same as the cash advance rate.
TIP: Make sure you read the terms and conditions on your credit card to find out the standard interest rate applied to balance transfers after the introductory period.