AA launches top cashback and balance transfer cards
The AA has launched three new credit cards, offering cashback on fuel, a large fee-free balance transfer facility or a low-rate card.
Its FuelSave credit card pays 2% cashback on all fuel, rising to 4% if the user spends more than £500 a month. It also pays 0.5% cashback on other spending. There’s a £42 annual fee, and the interest rate on purchases is 14.9%.
Spending £80 on the card a week on fuel will earn £41.20 a year after fees. £125 a week on fuel will generate £218 cashback a year. That’s before considering the value of the other benefits. Cardholders who are not AA members will also get a year’s free breakdown cover and annual MOTs while they hold the card. Existing AA members will receive free MOTs while holding the card.
Kathryn Thomas, director of AA Financial Services, said: “The AA FuelSave card is, if you like, our ‘hero’ card. It’s an exciting proposition that resonates well with drivers, whether they are already AA members or not. It helps them to get something back from what is – for most people – their biggest expense after their home.”
Balance transfers and low rates
The AA Balance Transfer Card offers 0% on balance transfers for 22 months for no fee. This is the longest fee-free balance transfer deal on the market, knocking Tesco Bank off the top spot. The card has a 19.9% APR representative.
The AA Low Rate Card is 6.9% APR representative, and has no balance transfer fees. Both balance transfer and low rate cardholders can get 40% of European Breakdown Cover with the AA.
The Moneywise Verdict
These cards compare very favourably to the rest of the market. Despite the £42 annual fee, the FuelSave card is arguably now the best cashback card on the market if you spend more than £50 a week on fuel.
The low rate card is good if you’re looking for a simple product, but even without the transfer fees, if you’re looking to move a balance you’d be better off with a 0% deal.
The balance transfer card is the best in its class – you’ll pay no interest for 22 months, providing you make at least the minimum payment each month.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.
Moving money from one account to another, whether switching bank accounts or more likely transferring the outstanding balance on your credit card to another card that charges a lower – or 0% – rate of interest. Some card providers may charge a transfer fee that can be a percentage of the balance transferred.
This is used to compare interest rates for borrowing. It is the total (or “gross”) interest you’ll pay over the life of a loan, including charges and fees. For credit cards where interest is charged at more frequent intervals, the APR includes a “compounding” effect (paying interest on interest). So for a credit card charging 2% interest a month (equating to 24% a year), the APR would actually be 26.82%.