Compare 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.

Rob Silvey
Money expert
8
minute read
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Posted 13 MARCH 2020 Last Updated 15 DECEMBER 2021

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.

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.

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.

Some credit cards may offer you a ‘guaranteed APR’. A guaranteed rate is the actual rate you’ll need to pay on your credit card, which makes it a ‘what you see is what you get’ type of deal. However, being approved for a credit card with a guaranteed APR depends on your credit score and credit history.

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.

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.

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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Frequently asked questions

What is considered a low APR for credit cards?

A low APR card could be considered as one with a rate of around 10%.

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.

How can I find 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.

How does your credit record affect interest rates?

When applying for a low APR credit card, or any credit card/product, the card provider will look at your credit history to decide whether to approve or decline your application. The provider will assess your creditworthiness, including reviewing your credit history, looking at your income and outgoings, any existing or past debts and whether you were able to pay them off on time. If they decide to approve you for a credit card, this same information will then be used to calculate the interest rate you’ll be offered.

As a general rule, higher credit scores are rewarded with lower interest rates, while bad credit scores are charged higher interest rates. This is to offset any risk you may pose as a credit user if you weren’t in a position to repay the debt.

What’s the difference between interest and APR?

Many people use interest rate and APR to mean the same thing, but there is a difference that depends on the type of credit or borrowing. The interest rate is the figure used to calculate the cost of borrowing over a year, while the APR (annual percentage rate) includes the interest rate as well as any other fees tied to the credit or loan amount. So, if there are no extra fees, the interest rate and APR are essentially the same, but this isn’t always the case, so make sure you know which applies to you and the type of credit you’re applying for.

How are credit card interest rates calculated?

There are two ways that interest is calculated for credit cards:

  • Daily balance method – the interest is calculated based on your outstanding balance at the end of each day during the statement period.
  • Average daily balance method – the outstanding balance during the full statement period is averaged out between the number of days in that period. This is usually at the end of the month.

How can I avoid paying interest on a credit card?

The simplest way to avoid paying interest on your credit card is to pay off your balance in full each month. Whenever you’re thinking about buying something with your credit card, you should know when you’re realistically going to be able to pay it off. If you don’t think you’ll be able to pay it off that month, then you’ll need to prepare yourself for the interest costs tied to your credit card. If you can’t pay it off in full that month, paying off more than the minimum amount due each month is the fastest way to get back to paying no interest.

If you’ve got existing credit card debt and want to avoid paying interest on it, you could consider a 0% balance transfer card, which will transfer any debt onto another with a 0% interest rate. This could then allow you to manage your debt more effectively and pay it off sooner. Just be aware that the 0% interest rate is dependent on your application, is for a limited period and often comes with conditions that must be met to maintain that rate. Ideally, you should ensure the balance is paid before the 0% balance transfer period expires, or you’ll be paying interest again.

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