- 17
- Apr
- 08
Before we can define what a cheap credit card is, we must first decide if there is any such thing as a cheap credit card.
Fundamentally, a credit card will be cheaper than another card if the Annual Percentage Rate (APR) is lower. The APR is the amount of interest you will have to pay each year on the amount you borrow on the credit card.
Typically, APRs are around three times more than the Bank of England base interest rates and so even the lowest APR is still going to be quite expensive. Therefore, technically, there is no such thing as a cheap credit card if you base it on the amount you pay for the credit facility.
Sometimes, credit card providers will charge an annual fee for the privilege of having one of their cards. If your only option is to have a credit card that charges an annual fee, the cheap credit card in this case would have the lowest annual fee.
However, credit cards rarely come without a 0% interest offer of some sort these days and, if you factor this into the argument, it certainly lowers the amount you pay for the money you borrow.
If it lowers the amount of you pay for the credit facility then, technically, it makes the credit card cheaper and a cheap credit card would therefore have one of the longest 0% offers on the market.
If you are looking to make purchases on the card, the 0% purchases credit card with the longest 0% offer would be the cheapest.
But, if you are looking to transfer a balance to a cheap credit card, you will need to consider the balance transfer fee as well as the length of the 0% interest period on the balance transfer credit card.
The cheapest card in this case would have the lowest balance transfer fee and the longest 0% interest on balance transfers offer.
So, to sum up, here are the important features to look for when looking for a cheap credit card:
- Length of 0% interest offer – the longer the better (or should that be cheaper)
- If you are making a balance transfer from another card, you would then look at the percentage balance transfer fee – the lower the better
- If the cards don’t come with 0% offers you would look at the APR – the lower the better
- If the card comes with an annual fee, you would look at the price of this – the lower the better
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