When you make use of credit, you're borrowing money that belongs to a lender, and you're obliged to pay interest in order to enjoy this benefit. Different types of credit incur different interest rates - for example, student loans and home loans are usually charged at lower interest rates than short-term loans and credit cards. But, regardless of the type of credit you're using, you will be charged interest on it.
Because interest is an unavoidable by-product of debt, credit users often pay little attention to the specific amount they're charged. But this is a mistake: Inflated interest rates could greatly increase your monthly expenditure and total repayment amount. Thus, it is important to try to secure the lowest credit interest rates possible.
To this end, is useful to understand how credit interest rates work and how they're calculated. This way, you'll be able to take steps towards attaining the most competitive rates and flexible loans terms, possibly saving you significant amounts of money each month, and over the life of your loan.
How to get lower credit interest rates
Credit interest rates for credit cards are based upon an annual percentage rate (APR), which is the amount of interest charged on outstanding balances over the course of a year. Many credit cards offer an interest-free period. It's a good idea to settle outstanding balances within the interest-free period in order to avoid paying interest on them.
For example:Imagine that your credit card offers an interest-free period of 55 days. If you purchase goods to the value of R1,000 using your credit card and repay this amount within 55 days of the purchase, you won't pay any interest, and the goods will still cost you R1,000. However, if you don't settle the amount within the interest-free period, you'll be charged interest on this balance each month until you settle it.
In order to find low credit card interest rates, there are a few things you can do. First of all, compare the various credit cards available in South Africa. There are plenty of different credit cards available. By comparing the options available, you'll be able to pinpoint the ones that offer the more competitive interest rates, lower annual fees, and other cost-saving benefits.
Next, be sure to maintain a good credit record. The more efficiently you handle debt, the lower your interest rates are likely to be. Individuals who handle their debt irresponsibly pose a greater financial risk to lenders, and are thus charged higher interest rates. By handling debt responsibly, you'll prove that you're creditworthy, and will probably qualify for more competitive interest rates.
Finally, you can chat to your lender about lowering your interest rate. Perhaps, for example, you received your credit card a few years ago, before you'd established a good credit history. Now that you've had your credit card for some time - and in the interim, may have also managed other lines of credit - you may be eligible for a rate adjustment.
Finding low interest rate credit cards
Use online credit card comparison tools to discover the lowest rate credit cards available in South Africa. Always choose a reputable lender, and remember that very low interest rates don't always equal good value: These credit cards may have high annual fees or limited benefits. Try to find a card that offers competitive interest rates as well as affordable annual fees and additional benefits, such as free travel insurance or supplementary cards.
In most instances, you'll be able to apply for these credit cards online. It's safe, quick and hassle-free, and you'll know within a matter of days whether your application has been successful.
