Guide To Low APR Credit Cards
When to opt for low interest credit cards?
Low-interest credit cards are one type of credit card, and they are appropriate for certain situations and consumers. Here, we will explore what exactly these cards offer, their pros and cons, and when they may be a good option compared to other forms of borrowing.
Low APR credit cards
A low APR (Annual Percentage Rate) credit card is a card which will have a consistently low interest rate, but won't have other perks which you might get from other types of credit. The APR is the percentage per year of the money you've loaned which you will be charged, including fees and interest payments.
The APR advertised is representative, meaning that at least 51% of customers offered the card will have to get that rate. Therefore, to get that rate you will need a good credit score, otherwise, you may be offered a higher APR, or won't be offered the card.
The APR on a low rate card will typically be around 8%, although there are often deals where it may be as low as around 5%. You can repay the full amount borrowed each month (and thus avoid paying interest), the minimum payment (see each card for details), or any amount in between.
Low rate credit cards vs other forms of loans
Low APR cards are suitable for borrowers with a good credit history and favourable personal finances. For people with bad credit history, there are specific cards which will help improve credit rating. One of the main advantages of low APR cards is that they are simple: the interest rate is fairly low, and this keeps budgeting simple.
When compared to 0% balance transfer and 0% purchase cards, there is no period after which the interest rate will jump up to a much higher rate. There is therefore no need to worry about juggling one credit card to the next.
For borrowers who always repay their balance in full that month, the best credit cards are those that offer rewards for spending. Repaying in full every month means paying no interest, and thus cards that offer cashback, or rewards such as store vouchers and air miles, will offer the best value for money.
For people who mainly intend to use their cards abroad, there are specialised deals which have low (and sometimes no) fees for this use.
When planning a big purchase for which payment needs to be spread over a number of months, a 0% purchase card or a personal loan would be most appropriate, depending on the cost of the purchase.
Overall, low APR credit cards are suitable for borrowers who might want to keep their budgeting simple, for those seeking to improve their credit score, and for those who may need some credit for an emergency and are unsure whether they will be able to repay it in full that month. They are quite a good introductory card for those with good credit history, and offer flexibility and a degree of peace of minds which other cards may not.
