Can a low-interest credit card be better than a 0% interest card?

1 March2011

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If you`re in the enviable position of having a good credit rating, then there may be a number of good credit card deals available to you. With the average credit card interest rate currently standing at around 17-18%, it`s no surprise that a lot of people want to find a card that charges a low rate of interest - or no interest at all.

You might ask: why would someone only want a low-interest credit card deal when there are so many interest-free deals available? But there is one key difference between the two: interest-free deals don`t last forever.

Interest-free (0% interest) credit cards

0% interest credit cards come in two main forms: 0% interest on purchases, and 0% on balance transfers. These serve two completely different purposes - the former is for buying things in advance, while the latter enables the borrower to repay debt without paying any interest.

Interest-free periods are limited on these cards. The typical duration is probably around 12 months, but some only last for as little as 3 months, while others can last up to 16 months, or even more.

So it`s clear that these cards are only suitable for the short term. You must repay everything you owe on this type of card before the interest-free period runs out, or you`ll be faced with debt that could grow more quickly than you expected.

Low-interest credit cards

Low-interest credit cards do charge interest, but at a much lower rate than a typical card. A typical interest rate on a low-rate card might be anywhere from 7% to 12% - meaning they often compete with personal loans in terms of value (yet the repayment terms are more flexible).

The low rate on your card will usually last for however long you keep that particular card. So if you`re planning on borrowing over a longer period of time and would prefer the flexibility of a credit card over the rigid repayment structure of a loan, a low-rate credit card could be ideal.

But if you`re only looking to borrow for a short period of time - or if you just want something for financial emergencies - then a 0% credit card deal could well work out cheaper.

Compare credit card deals with our free credit card comparison tool.

Review our latest credit card best-buys

Product	Transfer rate & period	New Purchases rate & period	Representative APR
Sainsbury's Low Rate Credit Card	- - 0% Fee	- -	6.9% (variable)
	Representative example: With this credit card the representative APR is 6.9% (variable) based on an interest rate of 6.95% (variable), transfer fees of 0% and a credit limit of £1200.
Barclaycard Platinum Simplicity	- - 0% Fee	- -	7.9% (variable)
	Representative example: With this credit card the representative APR is 7.9% (variable) based on an interest rate of 7.9% (variable), transfer fees of 0% and a credit limit of £1200.
NatWest Visa Low Rate Credit Card	2.9% 12 mths 0% Fee	0% 6 mths	9.9% (variable)
	Representative example: With this credit card the representative APR is 9.9% (variable) based on an interest rate of 9.95% (variable), transfer fees of 0% and a credit limit of £1200.
Royal Bank of Scotland Visa Low Rate Credit Card	2.9% 12 mths 0% Fee	0% 6 mths	9.9% (variable)
	Representative example: With this credit card the representative APR is 9.9% (variable) based on an interest rate of 9.95% (variable), transfer fees of 0% and a credit limit of £1200.
MBNA Everyday Credit Card	0% 17 mths 2% Fee	0% 7 mths	11.9% (variable)
	Representative example: With this credit card the representative APR is 11.9% (variable) based on an interest rate of 11.9% (variable), transfer fees of 2% and a credit limit of £1200.
Halifax Online Clarity Credit Card	- - 0% Fee	- -	12.9% (variable)
	Representative example: With this credit card the representative APR is 12.9% (variable) based on an interest rate of 12.95% (variable), transfer fees of 0% and a credit limit of £1200.
MBNA More Rewards Credit Card Account	- - 5% Fee	- -	12.9% (variable)
	Representative example: With this credit card the representative APR is 12.9% (variable) based on an interest rate of 12.9% (variable), transfer fees of 5% and a credit limit of £1200.
MBNA Rate for Life Credit Card	5.9% - 1.5% Fee	- -	16.9% (variable)
	Representative example: With this credit card the representative APR is 16.9% (variable) based on an interest rate of 16.9% (variable), transfer fees of 1.5% and a credit limit of £1200.
We provide a representative range of products on competitive terms and do not act exclusively for any credit provider. Credit limits may vary depending on your circumstances.

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