Tesco Bank launches top low-rate credit card
Filed under: Credit Cards
Tesco has launched a new credit card aimed at borrowers looking for a low rate for life. The supermarket already has leading 0% balance transfer credit cards and a top 0% purchase credit card.
So let's take a look at what Tesco can offer when it comes to the low APR credit card market.
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Trouble at Tesco
The Tesco Clubcard Low Rate Credit Card promises to charge a low rate of 7.8% on balance transfer and purchases for as long as you have it.
All balance transfers are free, so you don't have to pay a penny to move balances over from other credit cards.
Plus you get three months interest-free on balance transfers and purchases, giving you a bit of breathing space to get your finances in order.
With the average APR on a credit card at about 19% and balance transfer fees typically costing around 3%, this is a pretty good deal if you are looking for a tool to help you manage your debt for less.
In addition to the low rate, the card will also act as a way to boost your Tesco Clubcard balance. You get one Tesco Clubcard point for every £4 you spend. So with your loyalty card that equates to five points for every £4 you spend.
To apply you will need to have a minimum income of £5,000 and have a good credit history.
How it compares
Tesco's new low rate credit card is a market-leading deal.
The Sainsbury's Bank Cashback Low Rate Credit Card and the Sainsbury's Bank Nectar Low Rate both have the same lifelong rate of 7.8% with no fee for balance transfers. But unlike Tesco they do not offer any breathing space with a 0% deal on balance transfers and purchases.
However, you can earn 5% cashback on Sainsbury's shopping for the first three months and receive £5 cashback each month you spend £500 (£250 on Sainsbury's shopping) with the Sainsbury's Bank Cashback Low Rate Credit Card. The Sainsbury's Bank Nectar Low Rate offers the chance to bump up your Nectar points.
The Barclaycard Platinum Simplicity Visa is next up with a rate for life of 7.9% on balance transfers (no fee) and purchases.
Elsewhere the NatWest Low Rate Credit Card Visa and the Royal Bank of Scotland Low Rate Credit Card Visa offer a more expensive lifelong rate of 9.90%. But initially you can pay a lower 2.9% on balance transfers for 12 months and 0% on purchases for six months if you take one of them out.
0% balance transfer vs. low rate
A low rate credit card is different to a 0% balance transfer card, but can be just as useful in helping you to manage debt.
With a 0% balance transfer card you pay no interest at all on the credit card debt you transfer for a period of time, while a low rate card offers a smaller, more manageable rate for the lifetime of the card. Depending on your circumstances one might suit you better than the other.
Right now there is a huge range of interest-free balance transfer deals lasting well over two years.
The top card in the market comes from Barclaycard with its 28-Month Platinum Visa, giving you two years and four months to freeze the size of your debt for a 2.99% fee.
This market-leading deal is followed by five others offering 27 months interest-free on balance transfers. The Barclaycard 27-Month Platinum Visa has the lowest fee of the lot at 2.5%.
After that the Halifax Balance Transfer Card is the most affordable with a 2.7% fee, followed by the NatWest Platinum MasterCard and Royal Bank of Scotland Platinum MasterCard, which come with a fee of 2.99% and the Tesco Clubcard Credit Card for Balance Transfers, which comes with a much larger 3.15% charge for moving balances across.
While these top 0% balance transfers don't charge any interest for a long stretch of time, they cost money and are only temporary.
For example if you transferred £2,000 onto the Barclaycard 28-Month Platinum you would have to pay £59.80. And after the 28-month grace period, your balance would start accruing interest again at a rate of 18.9%.
If you don't manage to pay off the debt in time you'll need to transfer it onto another 0% card, but there's no guarantee that you will be successful or that there will be enough good deals when the time comes.
Alternative low-fee 0% balance transfer credit cards do exist, with the cheapest fee coming in at 0.8% from the Lloyds TSB Platinum Balance Transfer MasterCard, though this 0% period only lasts 15 months.
With a low-rate credit card you can transfer your debt free of charge and not have to worry about offers running out.
Compare low-rate credit cards