Credit card rates reach 8-year high

If you're paying the standard APR on your credit card, you're being ripped off more than ever. Check out all the best interest-free deals.

We all know credit cards can be an expensive way to borrow if you don’t play them right. But did you know just how costly they can be? According to the Bank of England, average interest rates rose to a shocking 16.69% in June. This was the highest level since February 2002 when they stood at 16.94%.

Now given that the base rate is still at its all-time low of 0.5%, you might wonder how credit card companies can get away with charging such extortionate rates. But the base rate and standard interest rates on credit cards have always had very little correlation. Even in February 2002 when the base rate stood at 4%, average credit cards rates were still almost 13% higher.

But it’s an unfortunate fact that the margin between the two is growing even wider, so there’s even more reason than ever for always avoiding the standard APR. Of course, 0% balance transfer credit cards are the perfect way of dodging a huge interest bill, and even better, there are some great cards on the market with really generous interest-free introductory periods.

Let’s check out some of the best…

Best balance transfer credit cards

Earlier in the year, Yorkshire Bank and Clydesdale Bank launched the Gold Card which offered an impressive 16 months interest-free credit on your balance in return for a 3% transfer fee. This gave borrowers plenty of time to kick their debts into touch.

Not surprisingly, these cards have flown off the shelves. Yorkshire/Clydesdale Bank currently warns that timescales for approving applications may take longer than normal due to the high volume of demand. You should hear whether your application has been accepted within 14 working days. Once the bank has received your signed application it can take another five working days for your card to be sent out.

Meanwhile, hot on their heels are a pair of newly launched credit cards from NatWest and Royal Bank of Scotland which offer the same fantastic 0% deal for 16 months, but this time with a transfer fee that’s a shade lower at 2.9%.

The NatWest Platinum Credit Card and the Royal Bank of Scotland Platinum Credit Card are the new market-leaders and are bound to prove really popular. To qualify you need a minimum income of £10,000, and your balance can be transferred from any other credit card as long as it isn’t issued by a member of the Royal Bank of Scotland Group.  

Best of the rest: 15-month 0% deals

In addition to these fantastic 16 month long interest-free deals, there are several cards not far behind. For instance, the Barclaycard Platinum with 15 months Balance Transfer offers you 15 months interest-free credit, as the name suggests. This deal comes with a fairly typical 2.9% transfer fee.

This is a good choice for those who don’t already have a Barclaycard, but do have an income over £20,000 with a good credit rating and history of managing credit well. You’re more likely to be accepted for the card if the debts you have on other credit cards and loans, but discounting your mortgage, come to less than 10% of your income.

Next up, it’s the Nationwide Gold Card and Nationwide Classic Card. Both provide a 15-month 0% deal and charge a 3% fee. The Gold Card is suitable if you’re over 25, and have an annual income of at least £25,000. If you don’t, the Nationwide Classic Card may be a better choice for you.

The next 15 month 0% deal is the First Direct Gold Card (2.9% fee applies). You should note with most 0% balance transfer cards, the transfer must be made within a set timeframe after your application has been accepted and your account opened. Most card providers allow a three-month transfer window, but at First Direct, the transfer must be made within two months to qualify for 15 months at 0%.

Recent question on this topic

• James Purdie asks:

  Can Barclaycard change the interest rate on a card without any communication.

  • 
    JoeEasedale answered "3% is not the standard rate for the card? It is the minimum payment? By the sound of it, they have..."
  • 
    MikeGG1 answered "James You don't appear to have correct information. Are you absolutely sure that INTEREST rate..."
  • Read more answers

This introductory offer is only available to new First Direct credit card customers. You won’t be eligible if you have held any credit card issued by First Direct within the previous six months.

As if all that wasn’t enough choice, there is one more 15 month 0% deal in the shape of the Creation Credit Card (2.98% fee applies). This card is suitable for borrowers with a minimum income of £20,000 and a clean credit history.

Avoid the APR

You can see there are plenty of impressive 0% cards on the market right now. 15 or 16 months is a really generous introductory period, but that doesn’t necessarily mean it will be long enough for you to completely clear your debt.

If that happens, make sure you arrange your next 0% balance transfer in good time to avoid the typical APR kicking in. The table below outlines the astonishingly high interest rates which apply on each of the cards mentioned once the interest-free period has run out.

Credit cards and the typical APRs

* The APR will be reduced by 1% to 15.9% for NatWest Advantage Gold current account customers and RBS Royalties Gold customers. This reduction is guaranteed to remain in place for at least 12 months.

You can see all the cards charge typical APRs which are very close to the average identified by the Bank of England data. In some cases, the APR could be even higher than the rates shown above since credit card providers are only obliged to offer the advertised typical APR to two-thirds of their customers.  

The exclusive deals

Finally, there are a handful of cards which offer the same 15 month 0% balance transfer deal, but are only available exclusively to certain borrowers. A quick summery is shown below:

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