What is a low interest rate credit card?
Written by Robert Bester, Consumer Finance Expert Robert has been a writer for six years, specialising in consumer finance and the UK lending market. Concentrating on consumer credit products, Robert writes informative articles that help customers manage their personal finances efficiently.
25th October 2021
3 minute read
The search for a new credit card can be a bit daunting as there are so many to choose from. However, one indicator you might use is the interest rate of the card, which can reveal how much you could be paying on an annual basis.
One type of credit card that might crop up in your search is a low interest credit card (or low rate card), that stays at a low rate for as long as you own the card. This can be particularly handy for those who like to budget and would like to make consistent payments every month.
If you’d like to find out more about low interest credit cards, we’ve put together a guide that should assist you in your search. Think of it as a map with many different paths towards financial enlightenment, all hand drawn in typical Guru-style cartography. So basically, a very purple map.
How does a low interest credit card work?
The interest rate and representative APR attached to a credit card will always dictate how much you might pay on top of the balance you have spent or transferred. So naturally, finding the lowest interest rate available is preferable for customers looking to borrow money.
A low interest credit card works differently to most other credit cards in that the interest rate will stay at a low rate for the entire time you have the card, rather than for a short promotional period. Low APR credit cards are ideal for consistent spenders who like to know how much they will be paying off every month. You will also avoid being caught out by a limited promotional period that will force you to pay a higher interest rate.
With some low rate credit cards, you will find that you won’t have any other perks or rewards, simply because having the low interest rate is a highly-sought-after perk of having a credit card.
Am I eligible for a low rate credit card?
Of course, since having a low interest rate means you will save money compared to a card with a high interest rate, it means that you will have to have a good credit rating to be accepted. If your credit score happens to be low, then you might need to take steps to improve your credit score before you think about applying.
Unsure about your credit score? Try the following two steps to ensure you don’t have any nasty surprises when applying for a low rate credit card:
- Check your credit report – get an idea of how your credit file is looking and if your financial history might have an effect on borrowing money
- Check your eligibility – use our free moneymatcher tool to find out if you are eligible for a low rate card, just by providing a few personal details. Read up on why you should check your eligibility too
If it’s your first credit card and you’re a little unsure, have a read of getting your first credit card with confidence.
Advantages and disadvantages of a low rate credit card
The biggest advantage of a low rate card is the consistency, as many other types of credit cards are guilty of having an interest rate that will change over the lifetime of you owning the card.
Having a regular credit card will mean that you might get a great deal for a short time, but eventually your interest rate will go up, meaning you will inevitably have to close the account, transfer the amount onto a new balance transfer card or continue paying a high interest rate.
It means that you don’t have to keep switching credit cards and can simply stick with one card for as long as you need.
While this will suit some borrowers, others may prefer to switch credit cards in order to get a good interest rate, especially if that rate is 0%. The disadvantage to a low rate card, therefore, is that you will always have to pay interest on whatever you have spent or transferred onto the card.
Is a 0% interest credit card better?
It might seem strange to some borrowers to even consider a low rate credit card when there are already 0% interest rate credit cards available. If you are a responsible borrower and are able to manage your spending effectively, chances are you can avoid paying interest altogether.
In this case, a 0% credit card is better, but only for as long as the promotional period lasts for. There is also the risk to consider. While not paying interest is great, if you are unable to pay off the balance before the end of the promotional period, or you accidentally miss a payment, you run the risk of your interest rate shooting up to the standard APR dictated by the provider.
Low rate credit card comparison
If you think a low rate credit card might suit your circumstances, you might want to start browsing to see what is available and which one might be the best for you. Always remember before you start to check your credit report and check your eligibility using our free moneymatcher comparison tool.