If you have ever used credit cards then you will undoubtedly know that the interest rates they charge on purchases are high, very high in fact. But they have actually been lowered recently. The most recent average rate on low-rate cards has gone from 13.2% to 12.95%. This decrease might not seem like much but it is the first time in nearly two years that the rate has been lowered. It is likely that the newly lowered rates are a lender’s way to get more Australians to take out a line of credit.
Understanding credit cards
Credit card companies will sometimes offer lower rates but raise fees on purchases or taking cash out and these other ways of making money might severely outweigh the drop in interest rates. Not all of the lending companies have lowered their rates but the few that have might be starting a trend. Higher-end cards have not lowered their rates to follow the trend but that might come in the future.
Lower interest rates on credit cards can sneak up on some borrowers though because the lower rate is not really that low and it can still cause a borrower to fall deep into debt. Transferring debt over to cards that offer an interest free period can solve the interest problem for the short term but those lending companies that offer interest free periods often raise the rates to higher than many other cards after the interest-free period is over. The best thing to do with high interest debt is to pay it off and pay it off fast.
Mounting credit card debt is terrible for a person’s credit rating and getting rid of that debt as fast as possible is the best way of handling it. Getting debt paid off during an interest free period is one way of relieving yourself of debt but one can also consolidate debt and get the payments down to one monthly payment sum with a lower interest rate. Consolidated repayments are easier to manage and the lower interest rate will make it easier to pay off the sum and get your credit rating back on track.
Do not be fooled by credit card companies offering reduced interest rates because those companies still plan on making money off of borrowers in different ways. So if you’re considering applying for credit cards instead of other types of loans for extra cash, do proper research into the rates and all additional fees and take time in deciding which company you want to apply to.