Here are a couple of types of credit card that are often overlooked.
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Here are a couple of types of credit card that are often overlooked.
Low APR Credit Cards
Several credit cards are marketed as `low APR' when they certainly aren't. How can 16% per year (APR) be considered low? Low, in my opinion, is 10% or less, unless you're struggling to get alternative credit and reduce your interest rates, in which case 12% might be low to you. And, really, low APR credit cards are best for those of us who can't get a 0% or other special deal that's appropriate for our goals.
If you reduce your interest rate from 16% to 10% then you will pay about 40% less interest per year if your card balance stays the same, and probably even less if you put extra money into reducing your balance!
Watch out with low APR cards because with most of them the rates can be changed at any time. Always read letters you receive from your card provider, and don't underestimate the impact of an extra couple of percentage points of APR!
For cards with 10% APR or less, there are just four providers that I can find. (It's relatively hard to get reliably complete data on low APR cards, but I think I've got them all. Please let our readers know by writing a comment or discussion-board post if you are aware of any other such cards that are still available to new customers.)
The Top Four Low APR Credit Cards
Card name | Typical APR* for purchases and balance transfers | Notes |
|---|---|---|
6.8% | ||
8.5% | You also get 0.5% cashback on purchases. | |
Intelligent Finance Flat Rate Credit Card | 8.9% | |
Co-Operative Bank Fixed Rate Platinum | 9.9% | You can fix the rate at 9.9% for 5 years. |
Data from Moneyfacts (which powers many of The Fool's search tools) and through my own meanderings round providers' websites. I checked the facts, ma'am, on 19th August.
*'Typical' means that two-thirds of applicants who are offered a card get the advertised rate. The other third get a worse one.
Lifetime Balance-Transfer Credit Cards
Lifetime balance-transfer cards have a fixed interest rate on balance transfers until you've paid off the balance, whether it takes you two years or twenty. (Please don't take twenty.)
I can find five that offer good rates of interest, although they're from just three providers. Here they are:
The Top Five Lifetime Balance-Transfer Cards
Card | Balance | Balance | Typical | Notes |
|---|---|---|---|---|
Citi Platinum | 4.9% | 3% | 17.9% | You get 1 |
Citi Platinum | 5.8% | 2.5% | 16.9% | |
Citi/Advantage Gold | 5.8% | 3% | 17.4% | |
Leeds BS Card | 5.9% | 2% | 17.9% | |
Barclaycard Platinum Credit Card with Long Term Balance Transfer | 6.5% | Nil | 16.9% |
Looking beyond the special-deal rate to include the fee (column three), the best two cards are Citi Platinum iTunes Rewards and the Barclaycard Platinum Card. If you're going to take quite some years to pay off your balance, Citi wins. If not then it's Barclaycard.
Don't make purchases on these cards, even if there's a 0% deal. If you want both balance transfers and purchases, consider one of these credit cards. Look for cards with deals of equal lengths.