Credit Card Interest UK

By: EconomyWatch Content   Date: 8 February 2010

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Interest rate is a crucial factor to consider while choosing a credit card. However, it is not the most important one. Everyone wants to get a low interest credit card that typically comes with interest free balance transfers and/or interest free periods. If you acquire a credit card with a low interest rate for a particular period, it is important to note that the standard rate will be applicable after the introductory offer ends.

Credit Card Interest UK: Basis of Charging Interest

In the UK, there are 14 different methods that various credit card issuers use to charge interest on credit cards. If you clear the balance in full every month you can save yourself from being charged the interest. The criterion to charge interest varies so much that you may end up paying double the amount as interest on one card than another with ostensibly the same interest rate.

Banks and credit card companies typically charge a higher interest rate from customers with poor credit ratings. This is because they are seen as high risk customers. Therefore, if you have sound credit history you stand in good stead to get a credit card with a low interest rate.

 

The criteria to charge interest can differ when you have borrowed money on your card and then pay off the subsequent bill. For instance, HSBC usually charges interest on the borrowed amount up to the date when the bill was produced. On the other hand, companies such as Bank of Scotland, RBS/NatWest, American Express and Cahoots charge you interest until you make the payment in full.

 

Most credit card issuers also charge interest on interest that was accrued during the previous month. It may be worthwhile to note that this criterion of charging interest is not followed by Ulster Bank, Tesco and Egg.

 

In most cases, interest will start accruing from the date you make a purchase using your credit card. However, companies such as Saga, M&S, HFC, HSBC and Liverpool Victoria start charging interest after some days of the purchase being made and the retailer is paid for the purchase.

 

If you have opted for a credit card that comes interest free for a specific period, your benefit may be scrapped if you still owe money from the previous month. This will be applicable even when you pay the subsequent bill completely. This criterion is followed by companies including Tesco, M&S and Sainsbury's.

 

Banks usually charge different interest rates for different transactions. Interest will be charged on the purchases you make using the card unless the balance is paid in full every month. The interest rate in this case may also be termed as the ‘purchase rate.’ Cash withdrawals with the card typically attract higher interest rates from the day cash is taken out.


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