A new credit card from the AA promises a low interest rate for the lifetime of the debt. But is it any good?
The AA has launched a new credit card which has a promotional deal of a lifetime balance of 6.9% on any amount transferred within the first 60 days of opening the card.
The competitive low interest card promises to only charge this rate on balances transferred to the card as long as the debt exists.
The deal
If you open up the card and transfer over a balance from an existing credit card you’ll have to pay a 2% fee. You’ll then pay 6.9% on the balance for as long as you have the card.
You can also transfer money to the card, for example from an expensive overdraft or a personal loan.
As the average interest rate on the credit card market lies between 14.9% and 29.9%, this is a huge reduction.
Low rate cards
These cards work if you’ve got a large debt you need to pay off and you don’t want to continually be switching the cards around.
But you need to make sure you don’t miss any payments or go over the credit limit on the card as this could result in the interest rate soaring up to 18.9% for balance transfers and 20.9% for money transfers.
The AA card is not the best on the market though. MBNA offers a similar deal set at a lower rate of 5.9% of the lifetime of the balance with a 1.5% fee on credit transfers and a 4% fee on money transfers.
Sainsbury’s also offers a low rate card at 6.9% with no transfer fees, which works out cheaper than the AA card, but this is just for credit card, not money, transfers.
0% balance transfer cards
A low rate card is different to a 0% balance transfer card, as with the latter you pay no interest at all on the debt you transfer.
When it comes to these kinds of cards there’s a huge range available and some of the best offer periods of almost two years before interest is charged.
Barclaycard is top of the table in this market with one 0% card set at 23 months, with a 2.8% fee, and another at 22 months, with a 2.6% fee.
These are followed by the Tesco Clubcard which offers 22 months of 0% for a fee of 2.9% and a 22-month card from Halifax with a 3% fee.
However, although these cards charge no interest, the fees are all higher than the AA card so you need to take this into account when applying.
They are also only set at 0% for a limited amount of time, so once this is over you’ll either need to have paid off your debt or you’ll need to transfer the debt to a new card. At this point there’s no guarantee you’ll be accepted for a new card and the standard interest rate will be a lot higher, around 20%.
More on credit cards:
Top credit cards for Christmas spending
Sports teams cheating fans on credit cards and savings accounts