What’s your credit card interest rate?

Credit card debt is not a cheap form of debt, from the consumer’s point of view. Certainly it’s unsecured but that also brings with it higher interest rates – between 8.99% and 23.50% p.a., according to the CANSTAR database. A credit card also makes it easy – a little too easy sometimes – to spend on impulse if you’re not disciplined.

It seems that interest rates on credit cards remain high whether the Reserve Bank New Zealand (RBNZ) decreases or increases the official cash rate or not. This is in stark contrast with home loans and term deposit accounts, which tend to reflect any official cash rate movement – up or down – within a very short time frame of rate announcement.

What credit card interest rate do you pay?

As mentioned above, credit card interest rates can vary significantly. At time of writing, credit card interest rates on CANSTAR’s database vary from 12.69% up to a whopping 25.45%. That’s a significant difference and, if you continually juggle a debt, check your credit card interest rate ASAP. If it’s in the high double figures, ask yourself whether you should be looking for a better deal!

What could your credit card debt cost you?

The following tables show the amount of interest that would be payable on credit cards with interest rates of 13% and 19% – and how long it would take to clear that debt with minimum repayments.

Interest rate of 13% p.a.

Outstanding balance

Time to pay off debt with minimum repayments

Total interest paid

$5,000

20 years 4 months

$5,066

$10,000

26 years 5 months

$10,839

$15,000

30 years

$16,611

Source: www.canstar.com.au Assumes only minimum repayments of 2% are made every month.

Interest rate of 19% p.a.

Outstanding balance

Time to pay off debt with minimum repayments

Total interest paid

$5,000

38 years 2 months

$15,121

$10,000

51 years 1 month

$32,779

$15,000

58 years 7 months

$50,437

Source: www.canstar.com.au Assumes only minimum repayments of 2% are made every month.

Which cards offer outstanding value?

To a certain extent, what you need from a credit card will depend on how you use it. If you spend up big but pay the outstanding balance in full each month, for example, the interest rate won’t matter too much for you. On the other hand if you’re constantly juggling a debt, the interest rate you’re paying is very important indeed.

CANSTAR can help you to shop around for a deal that represents outstanding value for you. You can check the details of our Credit Cards Star Ratings report here, and compare credit cards here.

 

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