Low interest (or low rate) credit cards help to minimise the interest that can make credit cards an expensive way of borrowing.
What are low rate credit cards?
Low rate credit cards leave little to the imagination. They are, as their name implies, credit cards that offer their users a low standard rate of interest - or low APR (Annual Percentage Rate). But, why would you want to pay interest, even at a low rate, if you can get a card offering 0% interest?
All credit cards, even 0% cards, charge interest. Sometimes it is deferred for an introductory period (and can be being entirely avoided by switching), but once the promotional rate expires, interest accrues on your balance every month at a specified rate.
Charging interest is the main method credit card issuers use to make money, so why do they offer 0% interest deals? Well, even though these promotions can be costly to card issuers in the short-term, enough customers fail to switch and therefore end up paying interest, these products remain very profitable over time.
For those who do switch before their 0% interest free deal expires, these cards are a very cheap way to borrow. But, if you don't, or if you miss a payment (which sees your interest revert to the higher level immediately), you're effectively paying an interest rate which is set to absorb the costs of a special offer that others are freely enjoying. In such cases, you'd probably have been better off if you'd used a lower APR card from the outset.
What makes a ‘low’ rate card low?
A low rate, or low APR card could be considered low simply if it is lower than the UK average. However, since some bad credit products charge interest of more than 50%, most mass-market cards would be considered low rate. Of course, that does not help when comparing products, so we tend to assume that cards charging less than the average mass-market products (which typically charge around 18-19% APR (variable)) are low rate cards. Don't worry though; we sort them by interest rate, so you can quickly identify our partners’ cheapest products.
How do low APR cards work?
Low rate credit cards are available from many major UK credit card issuers, and although deals vary slightly, they are all broadly the similar - They offer customers a lower (than average) ongoing standard rate of interest.
Undoubtedly, low rate cards are not the cheapest credit option available, but they do offer security against the significant interest rate changes that those with expiring 0% deals experience on their outstanding balances. Low rate credit cardholders also avoid the effort required to track their finances and switch cards continuously, as well as the fees incurred for transferring a balance.
What other benefits do low rate cards offer?
Aside from a lower standard interest rate, many products offer their own unique features. These vary from card to card, but can include:
Unlike balance transfer products, which often charge high interest on transactions once any 0% deals have expired, purchases on low rate cards do not incur such high-rate interest. Low rate cards are therefore seen as a good product for making purchases with, and some card issuers actively encourage purchases with rewards.
Rewards are obviously a welcome benefit, but, even at low rates, the interest you accrue can quickly cost more than the monetary value of your rewards – so don’t overspend just to get rewards, it’s almost never worth it.
Some low rate card issuers offer balance transfer options. The 0% periods are much shorter than those available on the market-leading 0% transfer products. However, low rate cards transfers tend to be fee-free, and the difference in the increased interest charged once the deal has expired is considerably smaller, making this a useful addition to some cards.
Interest-free purchases are available on some low rate cards, but, as with balance transfers, they do not compete with the promotional durations available on cards specifically designed for this feature.
Most low rate cards enable their users to make contactless payments up to £30, and many also offer the ability to make mobile payments via Apple Pay, Android Pay, or Samsung Pay.
Is a low rate credit card right for me?
Getting a card with a low APR can be an excellent way to simplify your finances, especially if you usually pay your balance in full every month, but want to avoid high charges when you don't. However, low rate cards are not the cheapest way to borrow.
Assuming you follow the rules (pay your monthly minimum on time and in full, and don't exceed your credit limit), 0% balance transfer, 0% purchase, or even combined 0% balance transfer and purchase cards are all cheaper sources of credit.
Carefully think through your options, as you don’t want to make too many credit card applications (multiple applications harm you credit score).
Can I get low APR card?
Every UK lender has developed unique criteria that must be met before they offer customers credit, and although low rate cards give issuers the opportunity to earn interest from customers from the outset of their relationship, applicants still need a good credit rating to obtain them.
If you are in any doubt, check whether you meet the following criteria.
You are a UK resident (on the electoral roll)
You have a UK current account
You have had no CCJs or IVAs within the last 6 years
You have not missed any credit payments
including loans, mortgage/rent, pay-monthly mobile phone bills, etc
You meet any minimum age/income requirements for the product
You are not already over-indebted
You have not had a credit application declined recently
If you don't meet one or more of these criteria, check your credit file(s)/score before you make an application, to help decide whether you should proceed.
The best low rate card is the one with the lowest APR (check the table above to see the current market leading products). However, whether this is the best low rate card for you is a different question. The best low rate card for you will be the one with the lowest rate, whose issuer will accept your custom. Read the published eligibility criteria carefully before you apply.
No. To get a low rate card you need a good credit rating. However, if you can only get a bad credit product, you should still look to minimise the APR charged. The best bad credit products often apply an APR which less than half of that charged by other bad credit products – Therefore, within their category, they can be seen as low rate cards.