Low Interest Credit Cards

The importance of a low interest rate depends on your payment habits. For example, if you always pay your bill in full, your credit card interest rate simply doesn’t matter. And getting a low interest credit would likely force you to sacrifice a lot of rewards value. Still, some people who always pay in full wind think they need such a card in case they forget to pay on time one month. But if you have a pristine payment record, credit card companies will almost always refund any finance charges associated with a single slip-up. So this is a moot point.

Low interest rate credit cards can help people who consistently carry a balance from month to month or have a big-ticket purchase coming up. But 0% credit cards would be even better since your full monthly payment will go toward the principal balance, instead of some of it being wasted on finance charges. That said, a low interest card is truly important if you occasionally revolve a balance. Your credit card company won’t give you the benefit of the doubt more than once, and a 0% credit card will not provide the long-term solution that you need.

Interest rates vary by card, and no issuer has a reputation for offering low rates across the board. So you should focus on finding the best deal, regardless of issuer.

After all, the biggest differences between credit card companies are in terms of customer service and product features. And while customer service is important, it should only be used as a tiebreaker between cards with equally attractive terms.

With that being said, here’s how the largest credit card issuers ranked in WalletHub’s latest Customer Satisfaction Report:

1. Discover
2. American Express
3. Capital One
4. Chase
5. Bank of America
6. Wells Fargo
7. Citi

Low fixed-rate credit cards are basically extinct. And there’s a fairly simple reason for that. Credit card companies lost the ability to change interest rates whenever they want when the CARD Act took effect in February 2010. In fact, they can only raise rates on existing consumer-card balances when the accountholder becomes 60+ days delinquent. The law does not cover small business credit cards.

As a result, credit card companies now use variable interest rates, which change based on a benchmark such as the Prime Rate, to make sure their offers keep pace with the broader economic climate.

Of course, introductory interest rates are an obvious exception to this rule, since they have a set expiration date.

Credit card interest rates can be as low as 0%, but only for a limited time. On the other hand, interest rates can pretty much go as high as consumers are willing to pay. That’s largely because there is no national usury law and most credit card companies operate under charters that allow them to be federally regulated.

The highest interest rate among current credit card offers is 36% (First Premier), according to WalletHub’s database of 1,000+ cards. But we’ve seen rates as high as 49.9% in the past. And if you become at least 60 days delinquent, a penalty interest rate – 28.04%, on average – will take effect. That would certainly limit the savings available from even the best low interest credit cards.

Finally, it’s also important to note that usury laws do exist at the state level. So if you are getting a credit card from a local bank, there might be an interest rate ceiling.

You can’t really lower an existing credit card’s interest rate. The one exception is if you’re behind on payments, in which case making up missed monthly minimums could result in your rate being reduced from the account’s Penalty APR to the Regular APR. But you can lower the interest rate on your credit card debt by switching cards.

If you already have credit card debt that’s racking up interest at a high rate, you could pay it off with a balance transfer credit card, which may give you a 0% introdocutory APR for a certain number of months after account opening. And the best balance transfer credit cards don’t charge either a balance transfer fee or an annual fee.

If you’re looking to avoid interest on an upcoming big-ticket purchase, there are even more 0% credit cards to choose from.

In either case, you will need good or excellent credit to get the top deals. You can check your latest credit score for free on WalletHub if you don’t know where you stand. We also recommend using a credit card calculator to make a plan for repaying your balance.

Finally, if you’d like to learn more about how to get a lower credit card interest rate, check out WalletHub’s guide on the subject.
 

You can consider a low rate credit card to be an offer with a regular APR below the market average for your credit standing. Here are the current averages for each credit tier, according to WalletHub’s latest Credit Card Landscape Report:

• Excellent Credit:13.16%
• Good Credit:18.14%
• Fair Credit: 22%
• Bad Credit (Secured):18.65%
• All Credit Card Offers:18.16%

An APR on a credit card basically shows how much interest a balance will accrue over the course of a year. For example, a $1,000 balance on a card with a 25% APR would grow to about $1,250 in 12 months.

The APR on a credit card is not its interest rate, however. When you carry a balance from month to month, interest is assessed on a daily basis. A credit card’s interest rate is therefore its APR divided by 365 (days in a year). So a card with a 25% APR charges interest at a 0.068% daily rate. Furthermore, given that interest charges from one day become part of the balance accruing interest the next day, your effective APR (EAPR) will always be a bit higher than the advertised, or nominal, APR. For example, the effective APR on a card with a 25% nominal APR would be about 28.39%.

You can read more about credit card APRs and how interest works from WalletHub’s guides on the topics.