Reduce your credit bill quickly

Plastic debt is rising, but lower interest rates are available if you shop around, writes Sophie Elsworth

CREDIT card customers who fail to pay off their plastic in full have an array of single-digit cards to choose from as desperate lenders look to sign them up.

The nation’s plastic customers have racked up a whopping $52.3 billion in card debt and more $32.3 billion is accruing interest, but experts warn customers if they’re not paying off their card in full each month they need to zoom in on the rate they are paying.

Financial services firm Canstar’s database shows on non-rewards credit cards the variance on interest rates is huge – ranging anywhere from 7.99 per cent to 24.99 per cent – while the average card rate is 14.25 per cent.

It also found there are many cards with purchase rates below the 10 per cent mark and some have interest-free periods stretching out to 55 days.

This gives customers nearly eight weeks to pay off their card debt without being slugged interest.

One of the nation’s largest lender, Westpac, recently rolled out a new card, the Lite card, with a purchase rate of 9.9 per cent, but put the card limit at a low level of just $4000.

And rival lender ANZ earlier this year announced cuts to two credit card interest rate deals, a move banks rarely make, so it really does pay to look to see what new deals are available and if you can save.

But Canstar’s spokeswoman Belinda Williamson said that regardless of card rates, “if you can’t control credit and spend more than you would because you have plastic in the pocket no credit card is right for you.”

She said sticking with a debit card was the best option, but those who insist on paying card consumers should ensure they can “afford to make a regular repayment.”

“The basic thing people should be considering when applying for a credit card is the purchase interest rate, which will apply if customers don’t pay off their balance in full before the interest free period ends,’’ he said.

“The second factor to consider are the fees and charges associated with the card and where possible we recommend avoiding making cash advances.”

This is where you withdraw cash from the credit card and pay interest from the moment you get your hands on the cash – these rates can be well above 20 per cent.