Low APR credit cards

Looking for a credit card you can hang on to for a few years? Don’t want to switch regularly? A credit card with low interest and other charges could be the answer. Understand how low APR credit cards work and compare to find the right card for you.

Looking for a credit card you can hang on to for a few years? Don’t want to switch regularly? A credit card with low interest and other charges could be the answer. Understand how low APR credit cards work and compare to find the right card for you.

Anelda Knoesen
From the Money team
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Posted 30 NOVEMBER 2020

What is a low APR credit card?

A low APR credit card comes with a lower rate of interest than you’d get with a standard credit card.

Average credit card rates are more than 20%, but you could get low APR deals of 7.9% - 9.9%, for example, if you shop around**.

The interest rate isn’t fixed, meaning it can rise or fall in line with market rates, but it should still be significantly lower than standard credit rates. You’ll usually get the low interest rate for both purchases and balance transfers made on the card.

Unlike credit cards that offer 0% interest for a limited period only, low APR credit cards have a low interest rate for the life of the card. That means you wouldn’t have to worry about clearing your debt by a certain date, before the interest rate is hiked up.

**Correct as of November 2020

Who are low APR credit cards for?

If you can get a credit card with low interest and a low or no annual fee, you might be able to borrow money for less, pay off your debt faster and keep your repayments affordable.

And if you have a low rate card you’re happy with, you may not want to switch for a while, making managing your finances simpler.

How does credit card APR work?

APR stands for annual percentage rate. It represents not just the interest on a credit card or loan, but other standard charges too, like arrangement fees and annual fees.  
‘Representative APR’ is what you’ll see when credit cards are advertised. It shows what your borrowing could cost if you borrowed £1,200 over one year.  
Although you can use APR to compare credit cards, it’s important to be aware that the rate shown isn’t necessarily what you’ll get. This will depend on factors including your credit history. The representative APR advertised has to be available to at least 51% of applicants but others will be offered a different, usually higher, rate. 
Remember, credit cards can have different interest rates and charges, depending on how you use them. For example, a card might have a rate of 19.5% for purchases and 27.9% for cash withdrawals. The representative APR shown for cards is usually based on the standard purchase rate.  

What are the advantages of low APR credit cards?

If you find you’re having difficulty paying off your credit card balance in full each month, a low APR credit card could help you reduce the amount of interest you pay. Also, because you usually get a low rate for as long as you own the card, you might find it easier to budget, as there should be no unexpected rate increases to cope with.

Having a low APR credit card should also mean you won’t need to keep switching credit cards to take advantage of low interest rates. Ultimately, this could help to improve your credit rating as, in the eyes of lenders, you won’t be seen as someone who flits from one card to the next - a habit that could harm your credit score.

What are the disadvantages of low APR credit cards?

Cards offering a low APR are unlikely to come with long interest-free periods for purchases and balance transfers. And they might not offer rewards.

The credit limits for low rate cards can also be low, so the card might not offer you enough credit for what you want to use it for.

If you have a poor credit history, you’re unlikely to be able to get a low rate card. In this case, you might want to look at cards designed to help you build credit.

Should I get a low APR credit card?

It depends what’s right for your circumstances. Low APR credit cards could be a good option if you’re looking to spread the cost of big purchases – a new bed for example - without paying a high rate of interest, or you want to pay off an existing costly debt.

Also, they might be worth thinking about if you’d rather not have the pressure of clearing your balance before a set deadline, as would be the case with a 0% credit card.

That said, you might be better off getting a card that offers low or no APR for a fixed period.

For example, if you need breathing space to pay off your credit card debt, it might be worth looking at a card that offers 0% on balance transfers. If you want to make a large purchase, a card that offers 0% interest on purchases for a set period might be worth considering.

To make these work for you, you’ll need to pay off the balance within the interest-free period.

What is considered a low APR for credit cards?

On 20 November 2020, average interest rates for credit cards were more than 20%. So a low APR card could be considered as one with a rate of 12.9% or less. 

What is the limit on a low APR credit card?

The credit limit you get on a low APR credit card - the maximum amount you’re allowed to spend - depends on the provider’s assessment of your credit history and financial stability, including your income.

You need to be careful that you don’t accept a credit limit that’s too low for what you need to buy. If you go over your credit limit, you’d be charged a fee. You might also be moved on to a higher APR for the card and your credit score could be damaged.

Can I withdraw cash with a low APR credit card?

Yes, if you have to withdraw cash on credit, a low APR credit card could help you keep costs down. But always explore cheaper alternatives for withdrawing cash first. With most ATMs, you can take out cash from your bank account using your debit card without incurring any fees or interest.

Try to avoid withdrawing cash on a credit card unless it’s absolutely necessary, as there’s usually a fee to pay, and interest will be charged from the date of the withdrawal, even if you clear your balance in full the same month.

It’s also worth bearing in mind that you might pay a higher rate for cash withdrawals than you would for purchases or balance transfers made on your credit card.

Should I consolidate debts onto a low APR credit card?

A low APR credit card could be a way to consolidate debts into one simple monthly payment, to help keep tabs on what you owe. But it’s worth considering other options first, like a personal loan or 0% balance transfer deal.

If you have less than £5,000 of debt, a 0% balance transfer credit card might be your best option. It lasts for a set period before a higher interest rate is charged on what you owe. Remember, it would only work out cheaper if you cleared the balance before the interest-free deal ended.

If you have more than £5,000 of debt, a personal loan could give you a cheaper rate of interest to help you manage your finances more effectively.

Low APR credit cards could help you in your efforts to pay off your debts over the long term if neither of these options is suitable for you.

What’s the best low APR credit card?

It depends on your priorities. When you’re comparing, you can look at:

  • APR
  • Any non-standard fees and charges – for example, for missing a payment or for late payments
  • Introductory offers (is there a 0% interest period for balance transfers and purchases?)
  • Rewards or points 
  • Customer service
  • Eligibility criteria
  • Security
  • Application process

How can I make the most of my card?

A low APR credit card could help you save money on purchases if you don’t always pay off your balance in full each month. Switching to a card with a lower interest rate could also help you pay off your debt faster.

The more of your balance you clear each month, the less you’ll pay in interest overall. The potential advantage of low interest cards is that if you do need to borrow for a while, you might pay less interest than you would on other cards. Over the long term, this could save you a substantial amount.

Can I get a low APR credit card if I have bad credit?

The APR you’re offered will depend on a number of factors, including your credit history and personal circumstances. Anyone with bad credit, or no credit history at all, is unlikely to be accepted for one of these cards.

Even if you do qualify, you may be offered a significantly higher rate than the one advertised if you’re deemed to be a higher risk by providers. There are specialist credit cards for people with bad credit.

You can find out what cards you’re likely to be accepted for by using our credit card eligibility checker. That way, you can avoid making multiple applications, which, if declined, would impact on your credit record.

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