An Introduction To Credit Cards With A Single Flat APR

There's a new kid on the credit card block, which does away with the confusing array of interest rates for different kinds of credit card usage. Find out more about flat rate cards in this article by Cardsense's Michael Strauss

When credit cards were first introduced, they were a pretty simple proposition: use your card for purchases, and be charged a single rate of interest on your unpaid balance.

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Then came the rise of the ATM (cash machine), and credit card issuers realised they could lend money by allowing their cards to be used to withdraw cash on account, and could earn more this way by hiding away a higher interest rate for cash withdrawals in the credit agreement small print.

Next came the balance transfer offer, with either long term low rates or an introductory 0% deal, closely followed by introductory deals on purchases too. Not to forget the different interest rate often charged for overseas use.

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All these different rates for different kinds of card use can easily become confusing, and survey after survey showed that many credit card users were unaware of how much their card use was actually costing them.

In many respects, this suited the card companies down to the ground as they could advertise eye-catching rates for purchases and balance transfers while quietly imposing more lucrative charges on other kinds of card use.

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Amidst all the confusion though, some card issuers spotted a gap in the market - how about a simple, easily understood credit card with no offers or benefits, just a single low rate charged however the card was used? These cards became known as flat rate cards and their names usually reflected their transparency and ease of understanding, for example Barclaycard with their 'Simplicity' card, or the Co-op Bank's Clear.

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Whether you're using one of these cards for spending, transferring a balance, or even withdrawing cash from an ATM, you'll always be charged a single rate. And what's more, most cards can offer a great low APR as the issuers aren't having to fund expensive introductory deals or cashback schemes.

So is a flat rate credit card for you? The benefits are obvious - it's easier to understand how much your card use is costing you, and you'll also usually get a great rate.

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If you have a large balance to transfer, it might be more sensible to go for a card with traditional 0% introductory offer or one that features a low rate fixed for the life of the transfer.

Likewise, if you use your card for purchases a lot but usually clear your balance every month then the interest rate doesn't really matter to you, and you may prefer a card with a cashback or rewards scheme.

If however, like most of us, you use your card for purchases and cash withdrawals while carrying a balance from month to month, then a flat rate card could save you a lot of interest.