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Interest rates, APR and cash advances

  • 1.
    Learn about credit card rates and more

    Knowing what credit card rates, fees and charges will mean for you can help you make your choice.

    • You’ll normally have to pay interest on the money you borrow on your credit card
    • You can use APR to compare the cost of credit from different credit card issuers
    • Promotional rates can save you money if you choose carefully
    • You can consolidate your debts with a balance transfer
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  • 2.
    How do interest rates work?

    When borrowing money on a credit card you will most likely have to pay interest on the amount that you borrow. The issuer of the credit card normally determines your interest rate based on information in your credit file. That interest rate will be applied to the amount you've borrowed.

    Typically, interest rates are variable which means that they can be increased and decreased over a period of time. The reasons why interest rates may vary will depend on a number of factors, for example, how you manage your account, the cost of operating your account and also the current economic conditions.

    Interest rates also differ depending on how you use your card. It’s common that there are different rates of interest for balance transfers, purchases, cash transactions as well as promotional offers.

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  • 3.
    What is an APR?

    APR stands for Annual Percentage Rate. It is made up of the interest rate for purchases plus any fee issuers charge for the card as a whole, like an annual fee, or for making purchases.

    You can use it to compare different credit cards and loans.

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  • 4.
    What is representative APR?

    This is the rate most customers will eventually be offered by a credit card issuer. The APR which credit card issuers advertise may not always be the one that that you’re offered. Most issuers will have a range of APRs, often advertising the best rate.

    It’s a good idea to check with your credit card issuer what APRs they offer before applying as you could be offered these rates instead of a better rate which you’ve seen advertised.

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  • 5.
    How can promotional rates help me?

    Sometimes credit card providers offer promotional rates on balance transfers and purchases. These can include:

    • interest-free periods that go back to the standard rate once the period ends
    • low interest rate for the life of a balance.

    These promotional rates can save you money, but look for what suits you.

    It’s always best to check if there are any fees in relation to promotional rates. For example, you may get charged a fee for transferring your balance from one card to another. You should take this into account when considering the right product for you.

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  • 6.
    How will purchase rates affect me?

    This is what you’ll be charged when you use your credit card to buy things. Typically you’ll have up to 56 days (or around 20-30 days after your statement) to make your payment in full before you are charged interest. If you do not make your payment in full then interest is typically charged from the date the transaction is made until it’s paid in full.

    Some cards offer introductory purchase rates which may be suitable if you are looking to spread the cost of large purchases over a short period. Usually, at the end of a promotional period the interest rate will go back to the standard rate.

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  • 7.
    What's a balance transfer?
    • A balance transfer lets you transfer the balance from one credit card or store card, where you may be paying interest, to another credit card.
    • Balances transferred to your Lloyds Bank credit card could benefit from a promotional interest rate for a set period. A transfer fee may apply.
    • You can transfer from any card that displays a Visa, Mastercard or Amex logo.

    Find out more about balance transfers.

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  • 8.
    What do I need to know about cash advances?

    This is when you use your card to make a cash transaction on your credit card. A cash transaction also includes any transactions that can be converted back into cash, such as:

    • buying foreign currency
    • gambling transactions.

    Unlike purchases, interest on cash is normally charged daily from the date of the withdrawal, whether you pay off your balance in full or not. It is also common to be charged a fee for taking out cash on your credit card and the interest rate for cash transactions is usually higher than for purchases.

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  • 9.
    What fees and charges should I be aware of?

    Credit card providers may charge fees for:

    • using your card for cash transactions from a cash machine,
    • using your card for gambling transactions, buying postal orders or prize competition entry fees
    • transactions overseas or for buying foreign currency or travellers cheques with your card
    • missing a payment, making less than minimum payment or making a late payment
    • transferring a balance from one credit or store card to another,
    • a payment that fails to be collected from your bank (e.g. a Direct Debit).

    Some issuers also charge a monthly or an annual fee for having your card, regardless of how much you spend. Charges will be shown on your statement and should be detailed in your credit card agreement. Not all credit cards issuers charge these annual fees, and amounts can vary.

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  • 10.
    How do I avoid paying late payment charges?

    Setting up a Direct Debit will make sure that at least the minimum payment is taken each month, although this won’t prevent you from going over your credit limit. 

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  • 11.
    What do I do if I think I have been incorrectly charged?

    Contact your credit card issuer straight away so that they can review your account. If the account has been charged incorrectly, your bank or credit card issuer will refund the amount taken.

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Important legal information

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