A credit card is basically short term loan, so the lower the interest rate the better. Credit cards can also save the customer money, especially when they have a low rate of interest. With careful planning, and sensible spending, a low interest credit card can be used wisely in a range of ways.
There are hundreds of credit cards available in the UK, and they can be used to pay for a variety of goods and services, both at home and abroad, on the high street and online. There are plenty of opportunities to save money by using a credit card instead of other forms of payment. Whether buying goods and services at the shops, on the telephone or on the web, credit cards are a widely accepted and secure means of paying for things. But there are ways to save money especially when using low interest credit cards, so it’s important to understand how the work and how to use them.
Annual Percentage Rates
Low interest credit cards are much like other credit cards, but have a much lower rate of interest applied to them. An interest rate is set by the credit card provider as a proportion of the balance of the card account to be charged to the cardholder. This is because a credit card is essentially a short-term loan agreement between the credit card company and the cardholder. Interest on credit cards is shown as an Annual Percentage Rate or APR.
The APR is the proportion of the total balance borrowed which would be payable over a year. For example, if the APR was 10% and the amount borrowed on the credit card £1000, then the amount to be paid back to the company if the balance stayed at £1000 for a year would be £100. So the higher the APR, the more the amount of money that would have to be paid back by the cardholder. High interest credit cards can leave customers with significant debts if they do not keep on top of repayments, so it is important to get a credit card with an APR that is affordable.
It is up to the credit card company what the APR is for each credit card they offer, and this can vary significantly. So many customers find that by switching to another card and transferring their debt, they can take advantage of a lower rate of interest. This can allow customers some time to repay their debts on a lower APR instead of struggling to repay a high rate of interest when there is so much interest being added that the debt increases at a rate that is more than they can clear the balance.
Choosing the right low interest credit card
Choosing a credit card with low interest means that repayments are more likely to be affordable whilst still giving the cardholder the freedom to pay for a range of goods and services. Transferring the balance of a high interest credit card debt to a lower interest credit card balance can give the cardholder the breathing space needed to repay the previous debt. At the same time cardholders can pay for the things they need at a low rate of interest.
Like most credit cards, a low interest account can still have a range of money saving features such as reward points and cash back offers on purchases, as well as a period of time between the purchase and the date the interest is added. This can be up to 59 days, giving the cardholder the opportunity to make purchases and then repay the balance before any interest is added at all. It is important to make a note of any introductory time limit offer on low interest credit cards, and budget accordingly.
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