Interest Rates

Interest rates – sometimes referred to as an annual percentage rate (APR) – are fees charged by your credit card lender for borrowing money. These rates are dependent on the type of card you have, the transactions you make (and when you make them), and how often you make repayments.

Interest rates are expressed as a percentage “per annum” (p.a.), meaning it’s a yearly rate. You may see some cards on the lower end of the spectrum showcasing a 12 – 13% interest, and others over 20%.

How is my credit card interest calculated?

Most people believe that credit card interest is calculated every month. Actually, it’s calculated daily.

(Outstanding daily balance for anything you purchased + other types of transaction [e.g. cash advances, balance transfers] + unpaid interest) multiplied by your credit card’s daily interest rate (which is itself the APR/365)

Say you bought $100 worth of groceries, but didn’t pay your bill by the due date. Your card has an interest rate of 17.99% p.a. (per annum). Within a day, you’ll owe about $100.05. This amount will compound until your balance is paid off.

Now, let’s complicate matters further. On the sixth day of the billing period, you withdrew $50 from an ATM using your credit card. This is known as a cash advance because you’re charged interest from the day you withdraw the cash. So, you’ll be charged interest over those 24 days and beyond. By the end of the month, that $150 and all the interest will be bundled together into a single amount.

Interest-free cards

You should also try to leverage interest-free days if your credit card supports them. Say you have an interest-free period of 55 days. Even if your billing cycle concludes every 30 days, you get a buffer of 25 days to pay off the total balance. If you have no interest-free days, interest is charged from the day you make a purchase.

Types of interest

There are a few different instances when interest will rear its head on your bill.

Purchase interest

This interest is charged when you use your credit card to make purchases in-store or online. It can also be applied when paying bills, going to the supermarket, and even on direct debits for things like gym or club memberships. To avoid it, just choose a card with interest-free days or one that charges 0% purchase interest.

Interest on cash advances

If you need to use your credit card to withdraw cash from an ATM, you will be charged a cash advance interest. A cash advance interest will also be applied to the purchase of travellers’ cheques.

Interest on a balance transfer

If you have transferred your credit card balance to another card, you may be able to opt for a lower interest rate for a fixed period. Keep in mind, however, that any new purchases you make on this kind of card will immediately attract interest.

Find a better interest rate for your credit card

At, you can review credit card interest rates from a number of Australian financial institutions. Make an informed decision when it comes to your spending habits and track down an interest rate you’re comfortable paying.

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