Not everyone has a fixed agenda when it comes to choosing the right credit card – paying off existing card debt or making a purchase interest-free, for example.
For many, who may just want to lean on a credit card for occasional borrowing, the interest rate is the most important factor to consider. Bank of England figures show that the average credit card APR (annual percentage rate) hovers just above 18% (variable) with some cards carrying APRs of more than 30%.
It’s possible to bring the cost right down by taking out a no-frills low interest-rate, or ‘low-APR’ credit card.
What is a low rate credit card?
Low interest rate credit cards mean you can borrow at an APR significantly lower than average, with some cards currently offering representative APRs of around 10% APR (variable) – half the rate charged by a standard credit card.
The rate you are offered however – and even whether you are accepted at all – will depend on your credit score, income and personal circumstances.
At ES Money, we carried out some desk research (December 2022) to find the best low rate credit cards on the market, which we have outlined below.
Bear in mind, however, that what’s available – and just how low providers are prepared to go – can change according to market conditions and competition.
Furthermore, not all applicants will qualify for the leading deals.
What are the best low rate credit cards?
Here are some of the best deals we found:
1. TSB Advance Mastercard
Representative APR: 9.9% (variable)
Availability: Not available to existing TSB cardholders
As well as an ultra-low 9.9% APR, this card also throws in three months’ interest-free on new spending and balance transfers (for a 3% fee). That said, there are better 0% cards on the market for both spending and clearing debt if this is your primary objective.
Some applicants will also be offered a higher representative rate of either 13.95% or 16.95% APR (variable).
2. Tesco Bank Low APR Credit Card
Representative APR: 10.9% (variable)
Availability: Cannot hold more than one other Tesco Bank credit card
This card from Tesco is a good bet in terms of rate alone. But you can rack up Clubcard points wherever you use it, too.
At Tesco stores or petrol stations you can earn 5 additional Clubcard points for every £4 you spend – on top of your standard points, while outside of the store, you earn point for every £8 spent on the card.
It accepts balance transfers, but there is no 0% promotional rate.
Bear in mind, you could also be offered a rate of up to 17.9% APR (variable) depending on your circumstances.
3. Co-operative Bank 3-Year Fixed Rate Credit Card
Representative APR: 8.9% (fixed) reverting to 18.3% (variable)
Availability: Must be an existing customer
At a (fixed) 8.9% APR, the rate on this Co-op Bank card might be the lowest on the market, but it’s only temporary.
It applies to the first three years for both purchases and balance transfers, after which a representative 18.3% APR kicks in. If you are also transferring a balance, a 3% fee applies of the amount in question.
To make best use of this card however, you’ll need to clear your balance before year four, or be faced with the interest more than doubling on the balance.
4. NatWest Credit Card
Representative APR: 12.9% (variable)
Availability: Must be an existing customer
The NatWest Credit Card, which charges a representative 12.9% APR (variable), is not the cheapest of the low rate cards. But it doubles as a handy card to take abroad, charging no foreign transaction fees.
However, there are no introductory rates on balance transfers or purchases.
You could also be offered it at a higher representative rate of either 15.9% or 19.9% APR depending on your circumstances, at which point the card may not be the ‘low APR’ deal you had in mind.
Exactly the same card is also available from NatWest’s sister banks, RBS and Ulster. However, in all cases you will need to be an existing customer to apply.
How did we rank the cards?
The low-rate cards are ranked primarily on representative APR, although note that they are not all available to new customers.
Where representative APRs are the same, additional perks have been considered, such as rewards on spending.
Here’s more about how low rate credit cards work, with some frequently-asked questions.
Is a low rate credit card right for me?
The way you use your credit card will determine whether a low rate card is right for you.
If you clear your balance every month and never incur any interest charges, look for a card that offers you a reward for spending as the interest rate will become irrelevant.
Similarly, if you have card debt but tend to keep a firm grip on your finances, you may be better off sticking with a 0% balance transfer card and jumping from 0% deal to 0% deal ahead of interest charges kicking in.
How much could a low rate credit card save me?
Whether you’ve got a balance to transfer or you regularly pay interest on your credit card spending, one of these low rate credit cards can significantly cut the amount you pay.
As an example, say you had a balance of £1,000 on a credit card and you could afford to pay off £100 each month.
With a card with an APR of 21.9%, you’d end up paying back an extra £103 in interest by the time you’d cleared your balance. If you’d taken out a low interest rate card with an APR of 9.9%, you would only pay £46 in interest, saving you £57.
What are the other benefits of a low rate credit card?
As is true of any credit card, spending on a low rate card will offer protection on what you buy.
That’s because, when purchases cost more than £30,000 and up to £100,000, the card provider becomes jointly responsible with the retailer under section 75 of the Consumer Credit Act should something go wrong, such as the item is faulty or not as described.
This protection will also cover you if the retailer goes bust before you receive your goods or services.
How should I pick a low rate credit card?
As well as the rate, it’s also important to weigh up a few other card features.
Check to see if there’s an annual fee. These are relatively rare now and none of our listed cards above charge one. But always check as it’s a cost to factor in to your sums.
If you’re transferring a balance, look at the fees for this too. Balance transfer fees can be charged up to 5% of the amount you’re moving which can take the shine off an attractive APR.
It’s also especially important with these deals, to get the rate that’s advertised. Legally, credit card companies only have to offer the advertised interest rate to 51% of successful applicants.
Shopping around and looking at how the overall costs stack up on different cards will ensure you get one that suits your habits best.
How do I get the most out of a low rate credit card?
Although a low rate credit card might mean you’ll be charged less in interest if you transfer a balance, there’s another key point that will determine how much it costs you. The more you’re able to pay off each month, the faster you’ll be able to clear the balance, and the less interest you’ll incur.
As an example, if you transfer £5,000 to a card with an APR of 9.9% and repay £200 each month, it’ll cost you £592 in interest and two years and four months to clear the balance.
Ramp your monthly repayments up to £300 and it’ll take 18 months to clear, and cost you £382 in interest – saving you more than £200.
Another way to benefit from a low interest rate credit card is to set up a monthly direct debit for your repayment. This ensures you never miss a repayment, helping to reduce your balance but also saving you additional interest charges as well as any fees for late payments.
It will also protect your credit rating.