Money Insider: Save money with the right credit card

Research from Sainsbury’s Bank Credit Cards this week revealed that 15 per cent of people making a large purchase on their plastic didn’t use one with 0 per cent interest on purchases

If you’ve got a card in your wallet that charges a low standard interest rate, there’s less financial impact if you can’t repay your full statement balance. (PaulPaladin/shutterstock.com)

It’s been a busy week in the credit-card market, with new long-term, low-rate cards launched by Lloyds Bank (Platinum) at 6.4 per cent APR variable and the Co-operative Bank with 6.9 per cent APR fixed for three years.

It’s good to see competition in this sector of the credit-card market rather than the incessant focus on the saturated 0 per cent balance transfer products.

If you’ve got a card in your wallet that charges a low standard interest rate, there’s less financial impact if you can’t repay your full statement balance.

For example, if you have to carry over a balance of £1,000 to clear your Christmas spending, then at 6.4 per cent APR with Lloyds you can clear it in three months by paying £336.90 per month, including a total interest charge of £10.70, whereas a card charging 18.9 per cent APR would cost £31.67 and you’d need to pay back £343.89 a month.

Both of the new cards are straightforward and ideal for everyday spending. With interest rates predicted to rise in the next year or so, the fixed rate option from the Co-op means cardholders’ rates won’t budge until at least the end of 2017.

The Lloyds card looks as if it has been strategically priced to top the low-rate best buy table.The crucial difference between the Lloyds Bank and MBNA card (at 6.6 per cent) isn’t about the interest rate, but more around the flexibility that the latter deal offers.

With Lloyds (and Co-op Bank) you are restricted to transferring balances between different cards. With a wide range of 0 per cent deals already available, the low rate cards aren’t the best option for this purpose.

Where the MBNA card is unique is that you can transfer funds from the card to your bank account (via a Money Transfer) without a fee.

This enables customers to repay expensive personal loan and overdraft borrowing, both of which can charge APRs well into double figures. It makes it a financially savvy choice for debt consolidation, as long as your credit record is in good nick.

Research from Sainsbury’s Bank Credit Cards this week revealed that 15 per cent of people making a large purchase on their plastic didn’t use one with 0 per cent interest on purchases, and may have ended up paying more than they needed.

The most popular big ticket items purchased included home improvements (69 per cent) while more than one in four paid for a holiday and 4 per cent even used their card to buy a car.

In a worst-case scenario Sainsbury’s estimates that using a card charging the market average 18.9 per cent APR the borrower would pay £268.36 more interest if paying back a £2,000 purchase over 18 months, compared with a 0 per cent interest card.

No signs of a remortgage slowdown

There’s still plenty of life in the mortgage market with the Council for Mortgage lenders reporting an increase in remortgage lending activity.

It reported on Tuesday that the number of remortgage loans, with a value of £4.4bn, was 20 per cent up on August figures. This isn’t surprising, with some of the excellent deals currently on offer.

This week Yorkshire Building Society launched a two-year fix at 1.47 per cent, with an £845 fee up to 65 per cent LTV. For those with a smaller stake, the five-year fixed rate of 3.09 per cent, with a £599 fee up to 80 per cent LTV from Leeds Building Society takes some beating.