Are high interest rates or low interest rates better?

Low interest rates are better than high interest rates when borrowing money, whether with a credit card or a loan. A low interest rate or APR (annual percentage rate) means you’re paying less for the privilege of borrowing over time. High interest rates are only good when you’re the lender. But that is technically what happens when you put your money in a savings account, checking account, CD or money market account. The rate at which you’ll earn interest from a bank will be indicated as a percentage, followed by “APY” (annual percentage yield).

When it comes to credit card interest rates, lower definitely is better (assuming you won’t be paying your bill in full each month – otherwise, the APR shouldn’t matter). In general, credit card interest rates tend to be pretty high compared to the rates charged by most loans. A low-interest credit card is one offering a regular APR under 14%, which also happens to be roughly the average rate for people with excellent credit. Your credit card APR depends heavily on your personal credit standing, and you will need at least good credit to expect even an average interest rate.

Low-interest credit cards are beneficial for people who may need to carry a balance from time to time, because less interest means less opportunity to slide into unmanageable debt. Credit cards with 0% interest periods are better for specific uses, like financing a big purchase or paying off an existing debt via balance transfer, because the 0% APR period will end at some point. Many credit card companies offer 0% APR periods for new accounts, but they often give way to higher-than-average regular APRs.