When you use a credit card, a lender loans you money until you repay the amount back. During this time when you borrow money, you will be charged interest on the total amount you borrowed after any initial interest free periods.

This is when you pay credit card interest, the amount of interest charged varies between lenders based on the credit cards interest rate. A lower interest rate is a better option when you leave a balance on your credit card continuously.

They’re generally two types of credit card interest rates, purchase rate and cash advance rate.

Purchase rate is charged when you buy anything on a credit card, like when you use your credit card in the shops or online.

Cash advance rate is charged when you draw cash directly from your credit card. Cash advances usually have a higher interest rate and are not recommended for most credit cards, you need to check your credit cards cash advance rate if you need to use it. Also note the terms of cash advances, they usually stop any interest free periods until you repay your card in full.  Something to watch out for!

The Interest rate charged is calculated using a compound interest formula. What compound interest does is add interest to the principle daily. Every day your balance owing grows because of this interest added. If you repay more than minimum repayments, then you can greatly reduce the compound interest effect on your debt.

If you don’t want to be paying too much Interest for using a credit card, it makes sense to use a low interest rate credit card when you know you’ll be paying interest. Compare low interest credit cards for Australian’s online before you make and application, you can choose a credit card with the least interest and save heaps of money in the long run.

Credit Card Interest Calculator

Do you know how much interest you are paying on your current credit card balance? To find out, use our  credit card interest calculator to see what compound interest you are being charged daily, weekly, monthly and yearly with the money you owe.

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This entry was posted on Thursday, August 27th, 2009 at 4:07 am and is filed under Credit Cards. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.