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7 ways to pay less or no credit card interest

Borrowing on a credit card is getting more expensive

Credit card borrowing is getting more expensive, with the average interest charged on purchases hitting a new high.

New Moneyfacts data revealed the average purchase APR jumped from 24.1% in June 2019 to 24.7% in September – the highest since records began.

However, you may not have to pay interest at all if you pay off your balance in full each month or take advantage of a 0% period.

Here we take a look at why rates have gone up, and what you can do to cut down interest on your credit card borrowing.


Why credit card interest rates are rising

The Moneyfacts report monitors the average purchase interest rate charged by all the credit cards in the market.

According to its figures, the average APR on credit cards has significantly jumped over the last three months.

  Sep 2017 Sep 2018 Jun 2019 Sep 2019
Average credit card purchase APR 22.9% 23.4% 24.1% 24.7%
Average credit card purchase pa rate 20.992% 21.365% 22.046% 22.528%

Moneyfacts Treasury Report

A recent spate of lenders withdrawing low-rate deals has contributed to the upward trend between June and September.

Tesco Bank pulled its longstanding market-leading low-rate Clubcard Credit Card deal, which charged 5.9% APR, earlier this year.

Meanwhile, Bank of Scotland, Halifax and Lloyds Bank increased the rate on their range of low-interest credit cards from 6.4% to 9.9% APR.

Elsewhere, MBNA’s Low Fee 0% Balance Transfer card and Long 0% Balance Transfer card went from charging 19.9% to 20.9% APR.

Creation’s IHG Rewards Club standard interest moved from 18.9% to 22.9% APR and its premium card, which includes a £99 annual fee in the APR calculation, shot up from 41.5% to 45.1% APR (19.9% to 22.9% per year).

Find out more: you can compare hundreds of credit card deals with Which? Money Compare.

What it means for you

The upward trend in credit card interest may make borrowing on plastic more expensive.

This is unlikely to have an immediate impact on you if you already have a credit card deal, as your interest rate would already be determined, though the lender can generally change rates if they want.

If you’re in the market for a new deal, however, you may find low rates harder to come by.

Whether you already have a credit card or about to get a new one, it’s important to ensure you follow the golden rules to avoid or cut down on paying interest.

1. Face up to how much interest you are paying

The latest figures from UK Finance show that 53.4% of credit card balances attract interest payments, though this is a 3.2% decline on last year.

If you’re paying interest each month, you shouldn’t bury your head in the sand.

The amount of interest you’re charged should be clearly stated on your credit card statement. You can use our credit card repayment calculator below to work out how much your debt is costing you.


Once you’ve double-checked the rate of interest you are paying, you have a few options. You could either repay your balance in full, increase your monthly payments to clear it sooner and pay less interest, or shift the debt to an interest-free balance transfer credit card.

Find out more: credit card interest explained

2. Take advantage of a 0% deal that suits your goals

Credit card lenders offer interest-free deals depending on what you want to achieve.

0% balance transfer credit cards allow you to move debt from an existing credit card and freeze the interest for a set period. You’ll usually pay a one-off fee. These cards are a useful tool for paying down large outstanding credit card bills.

0% money transfer credit cards allow you to move money from your credit card into your bank account interest-free for a set time, again for a one-off fee. They can unlock cash to pay off another expensive debt, like an overdraft.

0% purchase credit cards offer a set amount of time where any spending you do is interest-free. They can help you spread the cost of a large purchase.

3. Use rewards credit cards for everyday spending

If you don’t need to borrow on a credit card, you might instead want to use a cashback or a rewards card that offers perks on your everyday spending.

You can maximise points by using your credit card like your debit card, for things such as food shopping, petrol and travel. However, you must pay it all off each month.

This approach will mean you don’t get into unnecessary debt, as you are only spending what you can afford to repay immediately.

4. Avoid withdrawing cash on a credit card

Most credit card providers charge a higher rate for what are deemed to be ‘cash transactions’.

This can include withdrawing money on your credit card, but also transactions like gambling or buying foreign currency.

Apart from the higher interest, a cash withdrawal on a credit card may also be recorded on your credit report, dragging down your credit score.

5. Pay more than you need to by direct debit

Setting up a direct debit to pay your credit card bill will ensure you never miss a payment.

Most providers allow you to choose to either pay the minimum payment , a set amount or to pay off the whole balance.

Unless you have a 0% deal, and a plan to repay your balance, the minimum payment should be avoided.

You should pay more than is required, or the whole balance, to ensure you pay as little interest as possible and can clear your debt sooner.

6. Improve your credit score

Credit card providers only have to offer their advertised rate to 51% of customers whoapply. As a result, you may be offered a higher rate than you expected if your credit score is poor.

To give yourself the best chance of scoring the headline rate, you should check your credit report is in good shape.

There are easy steps you can take to improve your score, like registering on the electoral roll and ending any old financial associations.

7. Reject credit rate interest jacking

Some credit card providers will periodically check existing customer’s credit scores, and increase their interest if your score has dropped.

However, you don’t have to accept the change.

Your provider will write to you at least 30 days before any change. You then have 60 days to either accept the hike, or reject it, cancel the card and pay back what you owe at the old rate.

Which? Limited is an Introducer Appointed Representative of Which? Financial Services Limited, which is authorised and regulated by the Financial Conduct Authority (FRN 527029). Which? Money Compare is a trading name of Which? Financial Services Limited.

Please note that the information in this article is for information purposes only and does not constitute advice. Please refer to the particular terms & conditions of a provider before committing to any financial products.

Categories: Credit cards & loans, Money

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