Interest rates on credit cards have reached a record high. Here’s how to beat them.
The average cost of credit card debt has increased to a record high of 20.6% APR, according to new research from Moneyfacts.
That's up from 19.9% last year.
One factor behind this rise is the cap on interchange fees which will be introduced in October. When you’re making a transaction, your bank sends your payment to the retailer’s (acquiring) bank and deducts a small fee. This is the interchange fee. It mostly covers operating services such as fraud prevention and customer call centres.
[SPOTLIGHT]However, the European Commission is introducing a cap on these fees, which is denting the profitability of credit cards. It's already led to the withdrawal of some rewards credit cards, with Capital One and RBS scrapping their reward schemes, and is now helping to push up the interest rates charged too.
Beating the fees
Of course, if you pay your bill off in full every month, you won't have to pay any interest, no matter what rate your card carries. But if you need to pay your balance off in stages, you can still beat the fee rise by making use of a 0% credit card.
The top 0% balance transfer credit cards
If you have a big chunk of debt already on a credit card and need to pay it off in chunks, then check out the longest 0% balance transfer deals on offer today:
|
Credit card |
0% period on balance transfers |
Balance transfer fee |
Cost of transferring £2,000 balance |
Representative APR |
|
36 months |
2.49% |
£49.80 |
18.9% |
|
|
Virgin 36 Month Balance Transfer Credit Card MasterCard |
36 months |
2.50% |
£50 |
18.9% |
|
36 months |
2.90% |
£58 |
18.9% |
|
|
Bank of Scotland Platinum 36 Month Balance Transfer MasterCard |
36 months |
3.00% |
£60 |
18.9% |
|
35 months |
2.39% |
£47.80 |
18.9% |
|
|
MBNA Platinum 35 Month Balance Transfer Visa Card |
35 months |
2.69% |
£53.80 |
18.9% |
|
Tesco Bank Clubcard Credit Card for Balance Transfer MasterCard |
35 months |
2.70% |
£54 |
18.9% |
|
35 months |
3.00% |
£60 |
18.9% |
See more top balance transfer credit cards
The top low-fee 0% balance transfer credit cards
If you’re happier with a shorter interest-free period, you could get benefit from a lower (or free) transfer fee:
|
Credit card |
0% period on balance transfers |
Balance transfer fee |
Fee paid on £2,000 transfer |
Representative APR after 0% period ends |
|
23 months |
None |
£0 |
16.5% |
|
|
18 months |
None |
£0 |
18.9% |
|
|
19 months |
1% |
£20 |
18.9% |
|
|
24 months |
1.15% |
£23 |
18.9% |
|
|
Virgin Money Balance Transfer Credit Card |
26 months |
1.25% |
£25 |
18.9% |
|
28 Months |
1.35% |
£27 |
18.9% |
*Annual fee of £24
The best 0% purchase credit cards
If you have some big purchases coming up in the near future, like a new boiler or a fridge, an interest-free purchase credit card might be the best bet:
|
Credit card |
0% period |
Representative APR |
|
23 months |
16.5% |
|
|
21 months |
18.9% |
|
|
20 months |
18.9% |
|
| 20 months | 18.9% | |
|
Halifax Purchase Credit Card MasterCard |
20 months |
18.9% |
| 19 months | 18.9% | |
|
Lloyds Bank Online 19 Month Platinum Purchase MasterCard |
19 months |
18.9% |
|
Bank of Scotland 19 month Platinum Purchase MasterCard |
19 months |
18.9% |
|
19 months |
18.9% |
*Annual fee of £24
Compare even more credit cards with loveMONEY
More on credit cards:
Don’t send money overseas from your supermarket
The best low-fee balance transfer credit cards