Cradit Card Interest Rates
Where there are a number of credit card deals offering 0% interest on balance transfers for 12 months, the interest rates for purchases is usually much higher than with standard cards – on the best buy balance transfer deals they average around 16% to 17%, while standard rates are around 9% to 10%.
Rates for cash withdrawals tend to be even higher than for purchases and, again, are much higher on balance transfer deals than standard cards – an average of around 22% to 25% compared to around 9% to 11%.
“Don’t use balance transfer deals for purchases or cash withdrawals,” advises Tracy North. “If you intend to make credit card purchases, either get a combined balance transfer and new purchases deal or two separate cards.”
Interest rates on both purchases and cash withdrawals have also been increased since the OFT’s intervention regarding default charges – in the three months following it, 19 credit card companies did so and some by as much as 12.1% according to Moneyfacts.
If you don’t want to keep transferring your balance to different 0% deals or are not likely to remember to do so, a balance transfer rate for life deal could be more suitable, as otherwise you may end up paying high interest when the deal ends.
These charge you relatively low interest until the balance is paid off – usually around 4% or 5%. Interest rates for purchases and cash are on average even higher than for regular balance transfer deals so, again, they should not be used for these purposes.
As with any debt, the longer you take to pay it off the more interest you will end up paying so try to pay off as much as you can each month, rather than just the minimum amount, to keep costs down, especially as over the last five years the minimum payment required by credit card companies has generally fallen.