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If you tend to carry a credit card balance from month to month, having a low interest credit card will help you save money on interest charges. The average credit card interest rate is 19.99%, which is a high-interest rate for a recurring credit card balance. Having a high-interest credit card means you’re paying a lot of extra money on interest, money you could be saving if you switched to a low annual interest rate credit card. Like their name indicated, low interest credit cards come with much lower interest rates, sometimes as low as 4.99%.
The HSBC +Rewards™ Mastercard® offers cardholders an annual interest rate of 11.9% on purchases, balances transfers and cash advances for a low annual fee of $25 per year. Not only that, but this card also offers HSBC Rewards points and price protection. For a limited time, cardholders can earn 30,000 bonus points make their first purchase within the first three months of opening the account.
According to our Best of Finance methodology, the average Canadian will see $269 in HSBC Rewards points within the first year.
Credit score requirement for approval:
Fair: You’ve had a credit card or loan for one or more years. For the last two years, you’ve paid back debts to creditors (with no defaults). You haven’t missed more than two payments on your credit in the last three months.
Annual fee:
$25
Supplementary cards have an annual fee of $10.
Offer expiry date: March 29, 2021
Rewards:
Earning potential:
How does this card stack up to other rewards credit cards? We crunched the numbers using our Best of Finance methodology to see how much an average Canadian could earn over a 12-month period.
Rewards earned over a 12-month period = 30,000
Monetary value= $269
Annual fee = $0
Total earned over the first year (rewards minus annual fee) = $269
*The primary cardholder receives a rebate for the $25 annual fee for the first year.
First-year savings:
We compared a credit card with a $2,000 balance and a standard interest rate of 19.99% to the HSBC +Rewards Mastercard with an interest rate of 11.90%. The average Canadian could save roughly $161.80 in interest charges with this low-interest credit card.
Credit card balance = $2,000
19.99% interest rate = $399.80
11.90% interest rate = $238.00
First-year savings (what you would be paying on a standard credit card – what you would be paying on a low-interest credit card) = $161.80
*The annual fee is accounted for in the rewards calculation.
You can redeem your points for:
Insurance:
Other perks:
*Rates, product information, and rewards estimates are subject to change at any time and do not constitute financial advice.
With a low interest credit card, you can pay off your credit card balance faster. This is because more of your monthly payment is being put towards your balance instead of the interest.
Standard credit cards come with an interest rate ranging from 19.99%-22.99%, while low interest cards can be as low as 4.99% to 15.99%.
Let’s see an example of how much interest you can save by switching to a low interest credit card.
Let’s say:
| Typical credit card | Low interest credit card | |
|---|---|---|
| Annual interest rate | 19.99% | 8.99% |
| Monthly interest rate | 1.67% | 0.74% |
| Months until your balance is paid in full | 12 | 11 |
| Total interest paid | $154.49 | $65.13 |
Over the time period it take to pay down the $1500, in $150 payments every month you will have been charged $154 in interest under a traditional credit card vs the $65 under the low interest credit card. When you choose the low interest credit card, you pay less in interest. In this example, you save $89.36 in total interest, which would help you to pay off your balance a month faster compared to using the standard rate credit card.
Disclaimer: This is a simplified example for illustrative purposes to help you understand how interest charges on credit cards may add up.
Is a low interest credit card right for you? Here’s what you need to know
Most low interest credit cards come with a no annual fee, and typically no rewards. This is because they are specifically designed to make it easier for you to pay your recurring credit balance. Most low interest credit cards do not offer perks though because the low interest rate itself is considered the perk.
The best time to use a low interest credit card is when you have a high recurring credit balance to pay off. While comparing low interest credit cards, look for a great promotional interest rate to take advantage of.
When you’re comparing low interest credit cards, you’ll notice that there are two types, fixed rate credit cards and variable rate credit cards.
A fixed rate low interest credit card has the same interest rate throughout the year, while the variable rate low interest credit card has a fluctuating interest rate. This variation depends on two important factors, one being the bank’s current prime rate and the second being your credit score. If you have a low credit score (below 600), you may not be able to take advantage of some of the interest rate discounts that come with the variable rate, low interest credit card.
If you have a credit score lower than 670, stick to a fixed rate, low interest credit card.
