What is a low standard rate credit card?
The advertisements for credit cards that charge 0% interest for an introductory period are tempting. Pay no interest on your purchases or your balance transfer for 12 months or longer. Surely everyone should apply for a 0% deal, right?
Well, not necessarily. It’s true that 0% deals can offer great value for money, but they don’t suit everybody. If you want to make the most of a card that charges zero interest, you have to either clear your balance in full by the time the 0% deal expires, or you have to be prepared to switch to another zero interest credit card.
But how many of us have the necessary discipline? What if you have run up a big debt that you can’t pay off in time? And what if you are too busy to switch your cards on a regular basis? Or maybe you are worried that your application for a second 0% deal will be refused?
A credit card that charges a low standard rate could be a better option than a 0% deal. Yes, you will pay interest on your borrowings, but the rates are usually lower than on standard credit cards – and you won’t get stung when the 0% deal runs out.
What are the benefits of a low rate card?
Interest rates on low rate cards start at about 7%, which is lower than the typical rate on a standard card of about 18%.
The low rate usually lasts for the lifetime of the card, so you won’t get an interest rate shock when a 0% deal expires and the cost shoots up. You can also stick with the same low rate card without regularly switching from one deal to another.
There is normally no annual fee on a low rate card.
What are the disadvantages of low rates cards?
The interest rates on low rate cards are lower than standard, but they are not the cheapest rates on the market. There are plenty of 0% credit cards available, so if you are prepared to switch cards regularly, then you can usually get a better deal elsewhere.
Are there any alternatives?
If you have a good credit history you could qualify for a 0% offer, so you would pay no interest on a balance transfer or purchases on your credit card.
Alternatively, you could consider a personal loan. Some loans charge interest rates below 10%, but it depends on the amount you borrow – and your credit score.
You can check out all the latest low rate credit card deals with MoneySupermarket’s free comparison service. We have done all the hard work, so you don’t have to. Log on today and start saving money.
Glossary of terms
APR
This stands for Annual Percentage Rate. Any firm that lends money is required by law to quote the APR. Introductory rates do not include arrangement fees you may be charged and also don’t reflect any higher rate of interest that your borrowings will ultimately revert to. The APR takes into account the interest on a loan plus and additional charges making it easier for you to compare products. In general, the lower the APR the better the deal.
Balance Transfer
Balance transfer rates are applied to existing card debt that is being moved from one issuer to another or a consolidation of other debts. These rates tend to be lower than standard rates and apply to the debt transferred or consolidated for a specified term or until it is repaid in full.
Credit Card
Credit cards are a form of borrowing used to purchase goods and services, to obtain cash advances and for consolidating debt.
Direct Debit
This allows an organisation to take money directly from a persons bank account
Minimum payment
The amount you must pay each month to keep your account in order
Interest-free period
The time between when you buy something on the card and the date when you must pay your monthly bill. This can be 50 days or more and is interest-free. So if you settle your bill in full every month, it's free borrowing.
Promotional Rate
A rate that is applied to your account until a given expiry date. Thereafter it will revert to the rate applicable to your account at that time.
I want to see the full glossary of terms
Representative Example: If you spend £1,200 at a purchase interest rate of 6.95% (variable) your Representative APR will be 6.9% (variable).