Comparing low interest credit card offers
If you’ve got a credit card, it’s sensible pay off your balance each month if you can. But, of course, sometimes that won’t be possible. And that’s when a low interest credit card could be helpful to you.
We’ve looked at hundreds of credit cards with low interest rates to find some of the lowest interest rate cards. Whether you just want to find the best low interest cards, or understand the difference between interest and APR, we’re here to help.
Comparing our best low APR credit cards
Our comparison table will help you to find the best credit cards on the market. You’ll be able to see, at a glance, the main benefit of each. You’ll also be able to see the APR and the length of time that you’ll get 0% APR on your purchases.
APR stands for annual percentage rate. It represents the cost of your borrowing. The ‘representative APR’ is the rate that at least 51% of successful applicants for a credit card will receive. You have to pay interest if you don’t pay off the full amount you spend on your card each month.
Things to consider when looking for the best low APR credit cards
To find the best credit cards for your needs there are several factors you should consider. These include:
- Introductory APR (how long you’ll get 0% APR on your spending)
- Other rates and fees
- Rewards rates
- Rewards categories
- Other features and benefits
- Customer service
- Credit rating requirements
- Ease of application
What’s a low interest credit card? How do they work?
Low interest credit cards usually have a low interest rate. This helps you consistently keep your monthly repayments at an affordable level. Or a low interest credit card might have an introductory offer on purchases and balance transfers (ideally 0% APR).
What’s the average interest rate on a credit card?
In July 2019, the Bank of England confirmed that the average credit card interest rate to UK households had passed 20% for the first time in 20 years.
The rate you’re offered will be affected by your credit score, so you might not always get the advertised rate.
How does your credit record affect your interest rate?
When you apply for a low interest credit card, or any credit card in fact, the card issuer will look at your credit report. They’ll also look at your employment status and how much you earn. It’s a good idea to try to check and try to improve your credit rating before you apply.
What’s the difference between interest and APR?
The terms ‘interest rate’ and ‘APR’ are often used interchangeably. But actually, their meaning can change depending on what kind of lending they’re used in relation to. For credit cards, they mean the same thing.
The word ‘interest’ usually describes the annual borrowing cost.
The term ‘APR’ – which stands for annual percentage rate – usually includes the fees as well as the interest. This means it reflects the total cost over time.
How do you calculate interest on a credit card?
When you buy something on your credit card, you’re borrowing money from your card provider to pay for it. The interest is how much they charge you for borrowing it.
If you don’t pay off your credit card in full each month, your credit card provider charges you interest. The interest rate is a percentage of the amount borrowed.
There are two ways your interest might be calculated by your credit card provider. They’ll either use something called the ‘average daily balance method’ or the ‘daily balance method’. They usually lead to the same interest charge, even though the calculation methods are a bit different.
The average daily balance method looks at your balance over your statement period, averaged by the number of days in the statement period. The calculation is made at month end.
The daily balance method calculates the interest owed at the end of each day during the billing period.
Types of APR
There are several different types of APR. These include:
- APR on purchases: This is the rate charged on your credit card balance. It’s often 0% for a set introductory period.
- APR on balance transfer: This is the rate charged on a balance transfer. It’s often 0% for a set period.
- Cash advance APR: This is how much you’re charged for taking cash out. It’s usually effective from the day you withdraw the money.
- Penalty APR: This is a very high-rate APR. It’s triggered when you do something that your creditor isn’t happy with, which is why it’s called ‘penalty’ APR.
How to save money with a low interest credit card
It is very easy to build up a large amount of card debt if you have a high interest rate card. For example, if you owed £3,000 on a credit card with a 16.5% APR, and you were paying off the minimum amount, it’d take you 124 months to clear the debt. You’d end up paying £2,112 in interest, on top of what you owed.
How can I avoid paying interest on a credit card?
If you want to avoid paying interest on a credit card, you could pay it off in full every month. To help with this, you should try to avoid paying for things on your card if you know you can’t pay it off in full before the due date. For example, if you fancy buying yourself the latest mobile phone but you don’t have the money to pay for it, start saving. It’s better to save up and pay with cash or debit card, than automatically splashing out on your credit card. That’s when debt can start to mount.
If you’ve already got debt, you can reduce the amount of interest you’re paying by trying to pay off more than the minimum amount each month. We explained earlier that if you owed £3,000 on a credit card with a 16.5% APR, and you were paying off the minimum amount, you’d end up paying £2,112 in interest. But, if you paid off £200 a month, your interest would drop to just £383.
Your other option if you’ve already got debt, is to do a balance transfer to a 0% credit card. You’ll be able to pay off your balance more quickly and save a lot of money in interest charges.
Comparing low interest vs. higher interest ...
The interest rate you’re offered will make a huge difference to the overall amount you pay. It’ll also impact how long you’re paying your credit card off for.
For example, if your balance is £3,000 and your interest rate is 13.74%, it’ll take you 113 months to pay off if you’re making the minimum payments. That’ll cost you £1,651 in interest. If your balance is £3,000 and your interest rate is 23.74%, the same card will take you 187 months to pay off and cost you £5,031 in interest.
Can you ask for a lower credit card interest rate?
Yes. The worst that can happen is the credit card provider says “no”. It’s always worth asking, and it often pays off.
Common scenarios with low APR credit cards
If you have poor credit history or lots of credit cards, getting a low interest credit card might not work well for you.
But don’t panic – here’s what you could do if the common scenarios below apply to you …
If your credit limit’s too low …
A credit card provider might give you a low interest credit card, but with a credit limit that’s too low for what you want to buy. You could accept the card you’ve been offered, and split the cost of what you need to buy between that card and a second card.
When it’s time to pay them off, pay off the card with higher interest first.
Budget so that you can pay off your low interest card before your time’s up on any special introductory deals you’re getting.
If your credit score is too low …
Low interest credit cards usually favour people who have excellent credit history. If your credit history’s too poor to get a 0% credit card or low interest credit card, there’s another option.
If your spouse’s credit history is good, you could ask them to take a low interest card out and make you an authorised user. It’s a good idea to agree between you exactly how it’ll be used and paid off.
If you want rewards …
Just because you’ve got debt, it doesn’t mean you don’t want the benefits of some nice rewards! If you find a couple of credit cards with good rewards, you and your spouse could take out one each. You could agree to use one for petrol and the other for groceries, and reap the rewards of both!
If you’re worried that you can’t pay it off before your introductory offer ends …
If you’ve found a great 0% APR credit card, but you can’t pay it off before the 0% offer ends, make a plan. Check out whether doing another balance transfer would be cost effective. Otherwise, you could just pay off the maximum amount that you can every month, and continue paying that amount even when the offer ends. This’ll minimise the amount of interest you pay.
If you just want a card for a short time …
If you just need a new card to get you through a tricky period, you could look for a card with a good APR offer or balance transfer rate, but which has no rewards. That’s because rewards can tempt you to spend. Plus, you won’t be tempted to keep the card longer than you need to if there aren’t any rewards.
Why you should avoid keeping a balance on your credit card
Racking up a huge credit card bill is easy. But that’s not the only problem with keeping a balance on your card. If you’re not careful, your interest charges can actually end up costing more than your original spending. That’s why it’s 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…
You’ll 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 I pay off my credit card balance?
If you’ve got lingering debt on your credit card, there are six things you should do to help you tackle it.
Make a budget plan
Keep it realistic. That might mean ringfencing some money for fun, shopping or saving.
Calculate the interest
Base this on your balance, to see how much you’ll be paying in interest.
Work out what monthly payments you can afford
Then you’ll be able to see how many months it’ll take you to pay off your balance.
Transfer your balance
Think about using a balance transfer card, so you can pay 0% interest or low interest for a certain amount of time.
Resist the urge to spend on your credit card. Avoid rewards cards unless you have a lot of control and willpower when it comes to spending.
Keep the card
When you’ve paid off your balance, you could consider keeping your card. If you did a very small amount of spending on it each month and paid it off in full every time, it could help your credit rating.That’d mean you’d be more likely to be accepted for borrowing in the future, and get better rates and higher limits.
What does 'most popular' mean?
When we use the term ‘most popular’ on Uswitch in reference to credit cards, these cards are ranked by the number of clicks they have received on the site in the past 48 hours.
The most clicked on cards are at the top, with the least at the bottom. This reflects how popular they are with visitors to Uswitch.com. Consequently this is a good table to look at if you’re interested in seeing which cards most people think are worth getting.
How to compare two low interest credit cards
When it comes to choosing a low interest credit card, there’s more to look at than just the APR. You might like to look at the different kinds of APR, the annual fee, the rewards and so on.
Compare low interest cards
Sometimes, even if two cards have the same low interest rates and annual fees, another factor could make one card better than the other. For example, the costs of cash withdrawals could be cheaper with one. Or the rewards on one might suit you better. Look at the bigger picture.