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Getting a credit card in the UK is relatively straightforward, given the abundance of comparison sites allowing you to quickly and easily compare credit cards and find the right one for you.

Finding a credit card with a good introductory offer could help you avoid accumulating interest and may enable you to obtain a lower interest rate. When comparing interest rates, there are a few factors you could consider, including 0% interest rate offers, how you will be using your card and how your credit score could affect your search for a credit card.

Keep reading our helpful article on credit card interest rates and how you could find the right credit card for your circumstances.

What is credit card interest?

When you get a credit card, it will usually come with an applicable interest rate, which will apply to purchases and transfers you make while you own the card. 

This is usually displayed as an APR (Annual Purchase Rate) that indicates how much you would pay in interest on top of your balance if you borrowed that amount for a year.  Of course, using a credit card is a lot more flexible, so it’s likely that your balance will go up and down in a given month or year.

Ultimately, the higher the interest rate on your credit card, the more you will have to pay on top. However, there are two ways you could avoid interest entirely:

  • Choose a 0% interest credit card – there are plenty of 0% Purchase and 0% Balance Transfer credit cards available that will allow you to avoid paying interest completely, but only for a limited time. If you can effectively manage your card in this way, you could reduce your balance by the end of the 0% period or switch to a new 0% credit card instead

  • Pay off your balance in full every month – with any credit card, interest will only be applied on an outstanding balance at the end of the month (or whenever your payment date is set). If you can spend and then reduce the balance to £0 every single month, you could avoid interest at the same time

What credit card interest rates are available?

A good credit card interest rate will depend on your circumstances and what rates are available to you. You may find that you’re eligible for a 0% interest credit card, in which case you could avoid paying interest, though this is usually offered for a limited time period.

Credit card interest rates depend on the type of card you are looking at and the provider who has supplied it, though there are many other factors that go into determining the rate. Many credit card rates are also variable, which means they could go up or down in line with economic changes or when the provider feels it is necessary to make a change. 

Interest rates change frequently so it’s worth comparing from a range of providers to see what you could get and make sure you are looking at the right type of credit card for you.

You can find out more about applying for a credit card online here.

How to calculate your interest rate

When comparing credit cards, you will often see the interest rate displayed in the form of an APR, allowing you to easily compare which one is the lowest or best fit for your circumstances. You will also see a Representative Example that will allow you to calculate how much it would cost you per year if you chose to spend a certain amount.

However, since providers use different calculations to get the exact amount of interest, it can often be difficult to calculate yourself.

Whilst there are some interest rate calculators that exist, they often won’t be able to give you an accurate calculation. Instead, your provider should be able to give you a monthly statement, which will provide a breakdown of your accumulated interest. If you feel like you’ve been charged too much, then it’s best to get in touch with your provider to get clarification.

As much as possible, try to reduce your balance or switch to a 0% interest rate credit card that will allow you to avoid paying excessive interest in the future.

How to get a lower interest rate

Getting a lower, and therefore preferable interest rate can depend on a number of things, not least your credit score, which will need to be good or excellent in order to access lower credit card rates. Things to think about when trying to get lower interest rates on a credit card include:

  • Credit score – the most direct way to gain access to lower interest rates is to improve your credit score. In this way you will increase the likelihood of you being accepted for preferable credit card products

  • Type of credit card – you will usually find the lowest rates as part of the Purchase, Balance Transfer or Low Rate credit card categories, though it’s worth comparing others to see what you could find

  • Provider – certain mainstream providers will concentrate on card types so may be more likely to supply a lower interest rate, depending on what their range of credit cards look like. Other specialist providers may only do Credit Builder cards, for example, so may not be able to supply a low interest rate

  • Comparison site – we have a varied panel of providers as part of Money Guru but there could be different panels on other websites. If you can’t find a preferable interest rate on our site, it could be worth looking elsewhere or changing the card type

  • Bank of England Base Rate – another major factor when it comes to interest rates is the economy, which is reflected in the Bank of England Base Rate. This usually determines any major changes in interest rates and is worth monitoring as providers are likely to change your interest rate in line with it

How do I lower my credit card interest rate?

If you already have a credit card with an interest rate that is much higher than others, it might be worth contacting your provider to see if you can get it lowered, though this is usually only accepted in cases where you are struggling financially.

Ultimately it is always at your credit card provider’s discretion, so once you accept an interest rate when you apply and get accepted for a credit card, you will struggle to change it unless you have extenuating circumstances.

But if you do find yourself in financial distress and are struggling to make payments, get in touch with your provider and see if there’s anything they can do. It may be a possibility that they could offer you a temporary period of low interest until you are ready to make larger payments, which could give you the boost you need if you have suffered from having to pay unexpected expenses.

Start your comparison journey here using our FREE MoneyMatcher tool. Just fill out our simple form to get personalised results that will help you find a credit card using the link below.