They Can Help You Pay Off Past Credit Card Debts Faster
By taking advantage of a balance transfer, you can move the debt you owe on your current credit card over to a low interest card and save on high interest payments in the process. Some low interest cards even come with introductory balance transfer promotions that offer extremely low rates for a limited period of time to help pay off debt even quicker. Just be aware that most low interest credit cards will charge you a flat fee on balance transfers.
What Are The Alternatives To A Low Rate Credit Card
A low APR credit card isnt necessarily the cheapest way to borrow and you may be better off with a credit card that offers interest-free purchases, balance transfers or money transfers for a number of months.
However, remember a 0% credit card will only work out cheaper if you manage to clear the balance before the interest-free deal ends.
It depends on what you need a credit card for. If youre planning on making a major purchase and want to spread the cost over time, its worth looking at a 0% purchase or 0% money transfer card first.
And if you have debt on a card that you want help paying down, a 0% balance transfer card could be a better fit for you.
Depending on how much you want to borrow, you may find that a personal loan works out cheaper overall plus your monthly payments are fixed for the term and wont change with the base rate.
How To Compare 0% And Low
When choosing a 0% APR credit card or a low-interest credit card, let your specific needs be your guide:
If you have a big purchase coming up and will need time to pay it off, your best bet is a card with a lengthy 0% introductory APR period. Many rewards cards offer a year or more at 0%, which allow you to collect rewards on your purchase, then pay it off interest-free.
If you find you’re consistently carrying a balance a from month to month, look for a card with a low ongoing interest rate. Cards with an introductory 0% period tend to charge higher rates down the road.
If you want to transfer a balance to pay it down at a lower cost, you’ll want a card with a 0% intro period and a low balance transfer fee. Many of the cards on this list are good for transfers, but check out our best balance transfer credit cards for further options.
Once you’ve decided what type of card to look for, compare cards based on the following factors.
Introductory APR period
Dozens of cards offer newcomers a 0% APR period of a year or more when they first open the account. This includes a number of popular rewards cards, where you can get 0% interest for as long as 15 months. If you’ve got a big purchase coming up and will need time to pay it off, a 0% offer is perfect. In general, the longer the 0% period, the better, but there are a few things to keep in mind:
Balance transfer fee
Required credit profile
Free credit score
Rewards and perks
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Why You Should Avoid Keeping A Balance On Your Credit Card
Racking up a huge credit card bill is easy. But thats not the only problem with keeping a balance on your card. If youre not careful, your interest charges can actually end up costing more than your original spending. Thats why its important to pay at least the minimum amount due each month.
Having a credit card balance can also impact your credit rating. The amount you owe on your cards, compared to the amount of credit you have available, can greatly affect your credit rating. This is known as your credit utilisation ratio.
Working out your credit utilisation ratio
Youll have a credit utilisation ratio for each card you have, plus another one for all the cards you have combined. Ideally you want your ratio to be as close to 0% as possible but if not then under 30% is still acceptable. Keeping it as close to 0% as possible will help you avoid paying interest, and will also keep your credit rating healthy.
How Do Credit Cards Work
A credit card or credit account is simply a way to borrow money against a line of credit. Even though a credit card and debit card will look and work the same when making a purchase, they differ greatly in that debit cards pay out of a transactional account with a positive balance in it. When you make purchases using a credit card, that payment is borrowed from the bank, and you’ll have to pay it back with interest. The maximum amount of credit you can get depends on your personal profile, including your credit score and how much you earn. Higher earners can typically access more credit.
If you earn more than a certain amount per month, you may be offered a choice between standard and premium credit accounts. The premium credit account will come with added benefits, like a dedicated hotline and insurance on the borrowed amount. However, always double check when signing up for these benefits, as many of those aren’t “free” per se you still get charged for them.
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How Will A Low Interest Credit Card Help Me Save Money
With a low interest credit card, you can pay off your credit card balance faster. This is because more of your monthly payment is being put towards your balance instead of the interest.
Standard credit cards come with an interest rate ranging from 19.99%-22.99%, while low interest cards can be as low as 4.99% to 15.99%.
Lets see an example of how much interest you can save by switching to a low interest credit card.
Is a low interest credit card right for you? Heres what you need to know
What Is A Low Rate Credit Card
Low interest rate credit cards mean you can borrow at an APR significantly lower than average, with some cards currently offering representative APRs of less than 8% APR .
The rate you are offered however and even whether you are accepted at all will depend on your credit score, income and personal circumstances.
At ES Money, we carried out some desk research to find the best low rate credit cards on the market, which we have outlined below.
Bear in mind, however, that whats available and just how low providers are prepared to go can change according to market conditions and competition.
Furthermore, not all applicants will qualify for the leading deals.
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Can You Get Zero Interest Credit Cards
Yes, theres cards that offer 0% interest on purchases for a certain timeframe. The interest free period is usually somewhere between six months and 17 months.
The difference is that 0% interest offers are promotional only. So, while you might not pay interest for 12 months, for example, once the interest free period is up youll go back to paying interest.
0% purchase offers might be a handy option if you want to save on interest over the short term. You can compare 0% purchase offer credit cards here.
All 0% interest cards are listed here as low interest rate credit cards.
Pros And Cons Of Low Interest Credit Cards
- Savings. These cards can be a cheaper option as you pay less interest on purchases, which will help you save money and avoid falling into unmanageable debt.
- Low fees. Many low interest rate credit cards also have lower annual fees, which will also help you save.
- Promotional offers. Low interest rate credit cards sometimes offer 0% promotions on purchases and/or balance transfers, allowing you to avoid interest altogether for an introductory period.
- Less competitive rewards. If a low rate credit card offers a rewards program, it usually has a lower earn rate and smaller bonus points offer than more expensive cards.
- Fewer extra features. Lower rates generally mean fewer extra features, unlike platinum cards which often come with insurance covers and concierge services.
- Revert rates. If your card charges 0% on purchases for a promotional period, it will revert to a higher purchase rate after that.
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Best Low Rate Credit Cards
ot everyone has a fixed agenda when it comes to choosing the right paying off existing card debt or making a purchase interest-free, for example.
For many, who may just want to lean on a credit card for occasional borrowing, the interest rate is the most important factor to consider. Bank of England figures show that the average credit card APR hovers just above 18% with some cards carrying APRs of more than 30%.
Its possible to bring the cost right down by taking out a no-frills low interest-rate, or low-APR credit card.
Should I Get A Low Interest Credit Card
If you canât always pay off the full balance on your credit card every month or if you have credit card debt, a low interest credit card can save you a lot of money in unnecessary interest charges. Donât get fooled by enticing credit card rewards because if you canât pay off your monthly balances in full, those rewards will cost you. Credit card interest compounds and accumulates quickly, so the more youâre charged the longer itâll take you to pay off the debt. By transferring your balance to a low interest credit card, or just using one right from the start, you can save both in interest costs and potentially in the full length of time it might take you to pay off your credit card debt.
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When Is The Best Time To Use A Low Interest Credit Card
We know that low interest credit cards are helpful when you are carrying a balance on your credit card, but they are also great for making everyday purchases or for emergency expenses. With a low interest credit card, you will pay less interest than you would with a regular credit card and youâll have the security of using the card if you need to. While we donât recommend getting cash advances, many low interest credit cards also charge a lower fee compared to other cards. Many people also use their low interest credit cards to perform balance transfers, when they transfer some or all of their balances from one card to a new low interest credit card this allows them to have only one monthly payment at a much lower interest rate.
How Should I Pick A Low Rate Credit Card
As well as the rate, its also important to weigh up a few other card features.
Check to see if theres an annual fee. These are relatively rare now and none of our listed cards above charge one. But always check as its a cost to factor in to your sums.
If youre transferring a balance, look at the fees for this too. Balance transfer fees can be charged up to 5% of the amount youre moving which can take the shine off an attractive APR.
Its also especially important with these deals, to get the rate thats advertised. Legally, credit card companies only have to offer the advertised interest rate to 51% of successful applicants.
Shopping around and looking at how the overall costs stack up on different cards will ensure you get one that suits your habits best.
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Why Choose A Low
The average annual percentage rate charged on a credit card is around 21% , according to figures from the Bank of England.
And, while there are many credit cards that charge 0% interest on purchases and/or balance transfers, these interest-free periods are promotional and temporary. They revert to more typical rates of interest after the stated number of months.
This means that, unless you clear any balance or transfer it to a card from a different provider , the cost of your debt will suddenly shoot up.
Low-rate credit cards present one viable alternative. While they charge interest, rates are low and dont revert to a higher, post-promotion rate.
This means theres no need to juggle cards to keep costs down and if you do run up a small balance, it shouldnt feel like the end of the world in terms of the interest youll be charged.
How To Lower Your Credit Card Apr
If your current cards tout high APRs, there are some ways to score more favorable terms and conditions. You could potentially lower your credit card interest rates via the following strategies:
- Negotiate with your current issuer. Call your issuer directly to see if theyll consider lowering your credit card APRs. If your account is in good standing and your credit is in good shape, they just might oblige.
- Apply for a new credit card. Credit card offers change frequently and there is a chance you can qualify for a new card advertising lower interest rates. You may be able to apply this rate to an existing balance by applying for and conducting a balance transfer. Learn how balance transfers work.
- Improve your credit. Better credit can net you better credit card offers, so check your credit reports to see where you stand before calling your issuer or applying for a new card. You can currently check your credit reports for free each week via AnnualCreditReport.com. If your credit is less than stellar, you could improve your standing by making all your loan and credit card payments on-time, keeping your debt levels low and limiting new credit inquiries. Learn more about how to improve your credit score.
African Bank Gold Credit Card
The African Bank Gold Credit Card charges a variable interest of 15- 27.75%, a fee of R69 per month, and zero initial deposit. You must be earning a monthly salary of R8000 to get this credit card.
No minimum monthly salary or monthly fee required
Fixed Vs Variable Rate Credit Cards
Low interest credit cards come in two varieties: fixed rate credit cards and variable rate credit cards.
The difference between them is pretty simple a fixed rate stays the same while a variable rate can change based on two key factors: 1. A banks current prime rate and 2. your credit score. When it comes to low interest cards, most banks offer either fixed rate or variable rate options but not both.
Each card type has its own unique advantages.
The benefit of fixed rate credit cards is that theyre far more straightforward. Once youre approved for the credit card, youll know exactly what interest rate youll get down to the percent and it wont fluctuate regardless of shifts in the banks prime rate or your creditworthiness. Fixed rate credit cards are also far more likely to come paired with limited-time balance transfer promotions you can use to consolidate debts on previous credit cards and pay off at a fraction of the rate.
The advantage of a variable rate credit card is they could potentially land you a rock-bottom interest rate , but as long as you have excellent credit. The downside is you might get stuck with a higher rate if your credit score isnt great.
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How Much Could A Low Rate Credit Card Save Me
Whether youve got a balance to transfer or you regularly pay interest on your credit card spending, one of these low rate credit cards can significantly cut the amount you pay.
As an example, say you had a balance of £1,000 on a credit card and you could afford to pay off £100 each month.
With a card with an APR of 19.9%, youd end up paying back an extra £93 in interest by the time youd cleared your balance. If youd taken out a low interest rate card with an APR of 7.9%, you would only pay £36 in interest, saving you £57.
How To Compare Low Rate Credit Cards
With so many competitive low interest rate credit cards on the market, here are some of the features that can help you narrow down your options:
Fees and charges
These credit card costs can also have an impact on how much value you get and how much you can potentially save compared to other cards.
- Annual fee. Some low rate cards come with a $0 annual fee for the first year or for life, while others charge annual fees of $100 or more. Look for an annual fee that’s affordable for you so that this cost doesn’t offset any value you get from the low interest rate.
- International transaction fees. If you use your card to make a purchase online with a business that’s based overseas or when you’re actually overseas you will usually be charged a foreign transaction fee . But there are some credit cards that are more tailored to international use and offer 0% foreign transactions fees.
- Minimum repayments. Each statement period, youre required to make a minimum repayment. This is usually a small percentage of your total balance owing. If you dont pay this, youll usually be charged a late payment fee. However, if you want to minimise your interest payments and avoid falling into debt, its wise to pay as much as you can before the statement due date.
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