Credit cards have become a staple tool for building good credit rating, managing finances, and making purchases. With thousands of credit cards up for grabs, searching for the right one can be daunting and overwhelming — especially for first-time customers!
When choosing a credit card, one of the most important factors to consider is the interest rate.
Credit card interest rates can significantly affect your overall financial health, so it's important to explore and compare different rates available.
Whether you're a student, a professional, or simply someone seeking to improve their credit rating, the Compare Banks team is here to equip you with the essential knowledge you need to make an informed choice, and find the best low interest credit card that aligns with your specific needs.
In this comprehensive guide, we will show you the ins and outs of low interest credit cards, including what low interest credit cards are, the best low interest card options for 2024, top tips for using low interest credit cards, and more!
| Card Name | Score | Details |
|---|---|---|
| 1. Bank of Scotland Low Rate Credit Card | ★★★★★ | Click Here |
| 2. Barclaycard Platinum Balance Transfer Credit Card | ★★★★★ | Click Here |
| 3. TSB Advance Credit Card | ★★★★★ | Click Here |
| 4. Tesco Bank Low APR Credit Card | ★★★★★ | Click Here |
| 5. NatWest Low Rate Credit Card | ★★★★★ | Click Here |
What Is a Low Interest Credit Card?
A low interest credit card, or low APR credit card, offers cardholders a lower-than-average interest rate, when compared to other cards available. This means low interest cards often come with an annual percentage rate (APR) which is significantly lower than the average APR of standard credit cards.
To simplify further, if you have a balance on your card, you'll be charged less interest for borrowing money over time, which can save you a significant amount of money in the long-run.
How Low Interest Credit Cards Work
When you make a purchase with a low APR credit card, you'll receive a bank statement every month detailing your balance, payment due date, and minimum required payment.
As long as you carry a balance each month, you'll be charged APR for the outstanding balance on your account. The interest charges are typically calculated based on the agreed APR of your card and your average daily balance.
It's important to recognise that interest charges on your card will also vary depending on your provider's terms and conditions, promotional offers, balance transfers, timings and the total amount of payments made.
Understanding Interest Rates: Fixed vs Variable
A low APR credit card can either have a fixed or variable rate. A fixed rate means the interest rate of a credit card remains the same over a specific period, regardless of market changes or the prime interest rate set by your bank.
Because fixed rate cards uphold a consistent interest rate during your agreed period, they offer stability and predictability in terms of interest charges.
Conversely, a variable rate refers to an interest rate that is subject to change. Variable interest rates can periodically change depending on several factors, including the economic climate and prime interest rate fluctuations. While variable rate cards present a higher risk of interest rate hikes, they also offer the possibility of low interest rates.
When deciding between a variable and fixed rate credit card, assess whether you prefer the consistency and predictability of a fixed rate card, or the flexibility, with potential fluctuations, of a variable rate card.
Additionally, it's essential to be aware that the terms and conditions, such as charges for balance transfers or cash withdrawals, of a fixed or variable rate card will differ depending on the credit card provider you're choosing. Upon applying, be sure to read the disclosures and terms of use before signing any contracts, to check the card suits your needs.
Best Deals for Low Interest Credit Cards
1. Bank of Scotland Low Rate Credit Card
Bank of Scotland Low Rate Credit Card
Credit Limit
Representative % APR (variable)
10.9% APR
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Up to 56 days interest-free on purchases.
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No annual fee.
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Late payment charge £12.
Representative Example – If you spend £1,200 at a purchase interest rate of 10.94% p.a. (variable) your representative APR will be 10.9% APR (variable). Your APR and credit limit may vary depending on your circumstances.
- Representative APR: 10.9% (variable)
- Standard Balance Transfer Interest: 10.94%
- Standard Balance Transfer Fee: 5%
- Standard Purchase Interest: 10.94%
- Foreign Transaction Fee: 2.95%
Summary
The Bank of Scotland offers a straightforward low interest credit card. So long as you don't carry a balance from month to month, you'll receive up to 56 days of 0% interest on your purchases, for each billing cycle.
If you only care about the APR and aren't bothered about flashy perks, such as 0% introductory offers, then this card could be a suitable fit.
2. Barclaycard Platinum Balance Transfer Credit Card
Barclaycard Platinum Balance Transfer Credit Card
Credit Limit
Minimum £50
Representative % APR (variable)
24.9% APR
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0% purchase interest for up to 21 months from account opening.
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0% balance transfer interest for up to 18 months from account opening.
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No annual fee.
Representative Example – If you spend £1,200 at a purchase interest rate of 24.9% p.a. (variable) your representative APR will be 24.9% APR (variable). Your APR and credit limit may vary depending on your circumstances.
- Representative APR: 24.9% (variable)
- Standard Balance Transfer Interest: 0% for first 18 months (then 22.44%)
- Standard Balance Transfer Fee: 2.99%
- Standard Purchase Interest: 0% for first 21 months (then 24.9%)
- Foreign Transaction Fee: 2.99%
Summary
Generally speaking, this is a card that you’ll mainly want to prioritise if you’re in debt and need some relief from the high interest fees you’ll be paying. You’ll be able to avoid paying interest for the first 18 months with the Barclaycard Platinum Balance Transfer, so hopefully that should be more than enough for you to pay your debts off.
Now, while the standard interest rate of 24.9% certainly isn’t anything to write home about, the idea here is that you use this card simply for some short term relief before switching to one of the other cards on this list – all the while you can enjoy a range of benefits, such as 15% cashback at certain retailers.
3. TSB Advance Credit Card
TSB Advance Credit Card
Credit Limit
Minimum £500
Representative % APR (variable)
12.9% APR
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0% interest on purchases for the first three months.
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0% interest for the first three months on balances transferred within 90 days. 0% balance transfer fee applies in the first 90 days. After 90 days, a 5% fee will apply.
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Can be used with Apple Pay and Google Pay.
Representative Example – If you spend £1,200 at a purchase interest rate of 12.95% p.a. (variable) your representative APR will be 12.9% APR (variable). Your APR and credit limit may vary depending on your circumstances.
- Representative APR: 0% for first 90 days (then 12.9%)
- Standard Balance Transfer Interest: 0% for first 90 days (12.95%)
- Standard Balance Transfer Fee: 0% for first 90 days (then 5%)
- Standard Purchase Interest: 0% for first 90 days (then 12.95%)
- Foreign Transaction Fee: 2.95%
Summary
With a simple application process and generally low eligibility requirements, TSB’s low interest advance credit card is ideal for those seeking a straightforward and versatile card that's relatively cheap to maintain, too.
Unfortunately, the main benefit of this card lies in the fact that you don’t have to pay any interest, whether it’s on purchases or balance transfers, for the first 3 months – it doesn’t come with any particular extras such as cashback or rewards points.
Additionally, while this card is ideal for minor spending activities, like shopping for clothes or food, you may find better deals elsewhere for larger activities, such as spreading high costs.
4. Tesco Bank Low APR Credit Card
Tesco Bank Low APR Credit Card
Credit Limit
Minimum £250
Representative % APR (variable)
10.9% APR
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Collect Clubcard points almost every time you shop.
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Credit limit £250 to £1,500.
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Manage your money on the go with Tesco Mobile Banking App and Online Banking.
Representative Example – If you spend £1,200 at a purchase interest rate of 10.9% p.a. (variable) your representative APR will be 10.9% APR (variable). Your APR and credit limit may vary depending on your circumstances.
- Representative APR: 10.9% (variable)
- Standard Balance Transfer Interest: 11.46%
- Standard Balance Transfer Fee: 3.99%
- Standard Purchase Interest: 10.9%
- Foreign Transaction Fee: 2.75%
Summary
With incredibly low rates, including a balance transfer fee of just 3.99% and a foreign transaction fee of 2.75%, and exclusive incentives, like the Tesco Clubcard rewards point, you'll find this card is particularly handy for day-to-day spending — and saving on your Tesco groceries!
5. NatWest Low Rate Credit Card
NatWest Low Rate Credit Card
Credit Limit
Minimum £250
Representative % APR (variable)
12.9% APR
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Low rates on purchases and balance transfers.
-
No balance transfer fees.
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No foreign transaction fees on purchases.
Representative Example – If you spend £1,200 at a purchase interest rate of 12.9% p.a. (variable) your representative APR will be 12.9% APR (variable). Your APR and credit limit may vary depending on your circumstances.
- Representative APR: 12.9% (variable)
- Standard Balance Transfer Interest: 12.9%
- Standard Balance Transfer Fee: 0%
- Standard Purchase Interest: 12.9%
- Foreign Transaction Fee: 0%
Summary
NatWest offers a respectfully versatile low rate credit card. This card doesn't offer any short-term 0% deals, which is ideal for those who don't want to change cards after the promotional period expires. Making up for its lack of promotional deals, this card offers reasonably low (variable) rates through and through, and boasts a 0% standard balance transfer fee.
This card's 0% standard balance transfer is particularly ideal for individuals seeking to move a balance from an existing account to their new one, without getting nipped by hefty transfer charges. However, like most cards, transferring your balance will incur immediate interest charges.
Best Low Interest Credit Card Providers
With so several important factors to consider, finding a low interest credit card can be tricky. The last thing anyone wants, as a customer, is to choose a card that comes with poor customer service and sneaky hidden charges. Checking the reviews and overall customer satisfaction score of different providers is a good indicator of their services.
To pinpoint the leading card providers, Which? surveyed thousands of customers of 29 different credit card providers.
Below are the top UK providers offering low APR credit cards with the highest average customer satisfaction scores:
- American Express — 80% Customer Score
- Tesco Bank — 78% Customer Score
- Nationwide — 77% Customer Score
- Natwest — 75% Customer Score
- Bank of Scotland — 73% Customer Score
- TSB — 71% Customer Score
- Co-operative Bank — 66% Customer Score
5 Top Tips: Using Your Low Interest Credit Card Responsibly
To ensure you use your credit card responsibly, be sure to review our following top tips:
1. Pay On Time, In Full
If you manage to pay off your balance before your agreed due date, you can avoid paying any interest charges, and mitigate late payment fees. Paying your full balance on time will also help you maintain a good credit score.
2. Be Cautious When Spending Abroad
While some providers offer 0% foreign transaction fees, others may charge a hefty fee. Before spending abroad, be sure to always double-check your card's foreign transaction fees.
3. Keep Credit Utilisation Low
Your credit utilisation ratio is the percentage of your available credit that you're using. By keeping this low, ideally no more than 30% of your available credit, you will demonstrate excellent credit management. This will positively impact your credit rating and improve your overall credit worthiness.
4. Routinely Monitor Your Statements
By regularly reviewing your credit card statements, you'll remain informed about your spending habits and be able to detect any unusual activity easily, such as unfamiliar/unauthorised charges. Routinely checking your statements will additionally help you budget more effectively and remain financially organised.
5. Avoid Unnecessary Debt
While having an agreed limit with low interest charges can tempt you to splash out, always ensure you're only spending what you can afford to pay off within the billing cycle, to avoid unnecessary debt. This will help you maintain control over your finances and help you avoid excessive interest charges.
Who Is a Low Interest Credit Card Suited to?
Due to their minimal interest charges and fees, low rate credit cards are ideal for individuals who value their financial stability and are seeking low-fuss credit management. In this section, we dive into four types of customers that low interest credit cards are best suited to:
1. Customers Carrying a Balance
Because of their reduced fees, low interest credit cards can be particularly beneficial products for customers who often carry a balance from month to month.By opting for a low rate credit card, customers experiencing debt can effectively save money in the long run by minimising interest expenses that accrue on their outstanding balances.
2. Customers Trying to Build or Rebuild Their Credit Score
Low interest credit cards offer an opportunity for customers seeking to better their credit score and enhance their creditworthiness. This is because their low charges make it easier to pay off existing debts and demonstrate responsible financial behaviour.
Because of their low fees, this type of card makes debt management significantly easier, without the burden of accumulating excessive interest expenses, which can interfere with your ability to repay any existing debt, and ultimately hurt your credit score.
By maintaining a good track record of consistent payment, lenders and credit agencies will recognise such activity and subsequently boost your credit score. This will also heighten your chance of being accepted for other financial products, such as mortgages and loans.
3. Long-Term Borrowers
Individuals seeking credit for prolonged durations, whether it be managing ongoing expenses or financing substantial purchases, may find that low rate credit cards are an advantageous solution.
With low rates, customers can significantly reduce the overall cost of borrowing cash for extended periods, without the incurrence of excessive interest charges.
4. Cost-Conscious Consumers
Cost-conscious customers who are vigilant about avoiding excessive interest charges and prioritise minimal borrowing costs will greatly benefit from low rate credit cards. Because of their low fees, payments are easier to manage, making budgeting less of a challenge.
Pros & Cons of Low Interest Credit Cards
Low rate credit cards present several benefits that make them attractive to customers.
However, like all financial products, low rate credit cards also present several drawbacks. Before settling on a low APR credit card, be sure to familiarise with the following pros and cons, to effectively identify whether this product is right for you:
Pros of Using a Low Rate Credit Card
✔️ Significant Cost Savings: With a low interest credit card, you can save money on interest charges, especially if you're financing large purchases and carry a balance.
✔️ Easier Credit Building: Because of their low APR, repaying debt is a significantly easier task, meaning you're more likely to maintain a good repayment history, and thus, build your credit score.
✔️ Introductory Offers: Many low rate cards come with exclusive introductory offers, such as 0% APR for a set period. This can be advantageous for financing substantial purchases.
✔️ Effective Debt Management: Low interest rate credit cards are ideal for effective debt management. Because of their low fees, these cars minimise the accumulation of interest expenses, enabling you to efficiently pay off your outstanding balance.
Many cards also provide helpful budgeting and expense tracking tools, making it easier to stay on top of ongoing debt and spending.
✔️ Financial Flexibility: Because of their low APR, less money is spent on interest charges. This offers greater financial flexibility when spending money and paying off balances.
✔️ Rewards & Perks: Although not every low interest card offers rewards and perks, there are still many within the market offering attractive incentives, such as travel rewards, shopping points, and cash-back. This means you can benefit from your spending while also enjoying low interest rates!
✔️ Lower Risk: Compared to standard credit cards with high-interest, low APR cards present a lower risk of falling into a debt trap. This is primarily due to rates and fees being significantly low, making charges more manageable.
Cons of Using a Low Rate Credit Card
❌️ Lower Credit Limits: Many low APR credit cards present lower credit limits. This means your spending may be limited as payments will be capped at a lower amount.
❌️ Qualification Requirements: Although low interest cards are relatively accessible, some issuers may have eligibility requirements, such as good/excellent credit scores, which may restrict individuals from being approved for a card.
❌️ Limited Introductory Period: While many cards offer eye-catching promotions, it’s important to be wary that such offers are only available for a limited period. Once the agreed period has expired, interest charges will incur.
❌️ Penalty APR: Violations of your cardholder agreement, such as late payments, will result in penalty APRs. This can significantly increase your interest rate and restrict the primary benefits of your low APR card.
❌️ Extra Fees: Many customers get distracted by the low interest rates of low APR credit cards, and fail to recognise other charges that also come with this type of product, such as balance transfer fees, foreign transaction fees, annual fees, and so forth.
❌️ Balance Revolve Tendency: Balance revolve tendency refers to the action of carrying a balance on a credit card from month to month, without fully paying it off. Due to their minimal fees, low interest credit cards can tempt people to revolve their balances instead of paying their debt in full. If managed irresponsibly, this can lead to long-term debt.
❌️ Balance Transfer Restrictions: Various low APR credit cards may restrict certain debts from being transferred, limiting your ability to consolidate all of your high-interest debts onto a single card.
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