Why Low Rate Credit Cards Are Not Always The Cheapest

It is a widely held belief amongst consumers who use credit cards that offering the lowest standard APR rates are the cheapest types on which to carry forward debt. Recent research by a well-known online comparison website though seems to contradict this theory.

The comparison company compared the repayment of £700 worth of debt on two different cards. One had a 9.1% standard APR, while the other had an APR of 11.8%.

Logic would dictate that if the £700 balance was paid off in full over three months on both, the 9.1% APR would cost users less in terms of interest payments than the 11.8%. With these two however, this was not the case…the reason for the difference being down to the length of the interest free period on the duelling offers.

Interest free periods

The standard interest free period - that is the length of time that companies allow purchases to be exempt from interest - varies significantly from one provider to another. At their maximum, some offer only 45 interest free days.

Using APR To Compare Credit Cards
More often than not you’ll be advised that comparing different Annual Percentage Rates (APR) is the quickest and easiest way to compare credit card offers.

Adding to the mix is the fact that certain companies begin applying interest charges to purchases on the day of the transaction. This means that if you do not pay off the full balance, the provider will calculate interest backdated to the day that each transaction was processed.

How Much Do You Owe On Your Credit Card?
How many credit cards do you have? How much money do you owe on each card? Around twenty three people in one hundred have more than one credit card, and having more than one credit card means more than one balance.

There are though a selection of credit cards that operate their interest accrual system differently. Some in fact will not begin charging interest on transactions until the transaction appears on their customers account statements. Consumers who carry forward credit balances over the short term at least will benefit - some avoiding several weeks worth of interest charges as a result.

Get the full picture

Simply relying on low APR rates as an indication that certain cards are truly low-cost is not always the most reliable route to finding the most cost-effective credit cards for handling debt. Instead, consumers should assess the full package offered by companies on their s products. By doing so consumers will be able to make an informed judgement as to whether the credit cards that they are considering really do provide them with a saving.

Here is a quick run down of the key features you'll need to look out for when shopping around for the best low-cost credit cards…

Low standard APR rate : Some credit cards are offering rates as low as 5.9%
Long standard interest free period: Cards offering 55 days or more are cost effective when carrying a credit balance forward.
Cash advance interest rates: Some cards charge a higher rate of interest on cash withdrawals than on purchases or balance transfers.
Balance transfers : 0% balance transfer deals can offer significant savings. The best deals are those that combine this with a low standard APR on future purchases too.
Default charges: Some providers levy hefty penalties if you miss a payment or accidentally go over the credit limit.
Annual charges: Some cards require an annual fee.

Get To Know Your Credit Card Penalties
One of the most unsavory entries you can see on your month-end credit card statement is a credit card penalty fee. Why? Because, along with being charged a high rate of interest on the penalty, the fee is totally unnecessary if you manage your debt repayment properly.