Secrets of UK Credit Card Interest rates

Credit Cards and Interest Rates

What is Interest?

When you borrow money the lender makes money by charging interest.

Here's how it works

You're charged a percentage of what you've borrowed

For example: If you've borrowed £100 and the interest rate is 5% that means you'd be paying £5 in interest - so you'd have to pay a total of £105 back

Interest charges in relation to Credit Cards are usually referred to as being monthly (typically 1 or 2 per cent) or annually (APR) say 10%.

When does the interest charge start?

Some issuers charge you from the date you brought the item. So you're paying them interest even before you get their statement.

This might only be good for you if the interest rate is very low and you know you won't be paying off your debt each month.

How interest is calculated

In varying ways: It could be

As an Introductory rate where the issuer will, entice you in with a low rate for a particular period. See Introductory rates

Monthly; usually between 1 and 2%

As an APR. This is legally required of the card companies. It's away of trying to "level the playing field" by making it possible to compare the real ocsts of a card.

It includes all charges as well as the interest rate.

The card issuer has to state what the APR is.

When trying to compare the various deals on offer expect to be confused. It's called confusion marketing and it works because we simple souls tend to just give up and plump for the product that's closest to hand - in other words the one we've noted because of some suspiciously good offer.

If you don't check out the rest of the package you'll probably regret it. Don't wimp out. Give the b**rds a run for their money)

You can overcome this when shopping around for the best deal by getting the rival issuers to quote like against like. The best way of doing this is with the APR

Always check the terms and conditions