Low Interest Credit Cards

A good interest rate on a credit card is around 14%. That is roughly the average regular interest rate on credit cards for people with excellent credit. Even a relatively good interest rate on credit cards for people with lower scores is not all that low. For example, credit card users with good or fair credit could pay interest at an annual rate of 20%+ and still have a below-average APR. Better-than-average for a credit card overall isn’t much below 20%, either. That’s why the best interest rate on a credit card is 0%.

There are two ways to get the best possible credit card interest rate: 0%. For starters, lots of credit cards offer 0% APR periods as introductory perks for new customers. They can be a great help to people looking to finance a large purchase or transfer a debt to pay it off faster. But those intro periods are always temporary. Most (but not all) 0% APR credit cards require good credit or better, too.

The second way to avoid credit card interest altogether is to pay your full statement balance by the due date every billing period. Setting up automatic monthly bill payments from a bank account can be a big help with that. You can also try the Island Approach, which is a method of using multiple credit cards for different expenses. For example, you could use your lowest-rate card—maybe even a card with a 0% APR period—for things you’ll need to pay off over a period of time, and a rewards card for everyday purchases that you pay off every month. That way, you wouldn’t pay interest at all, no matter what rate you have on the rewards card.

There are also a number of things you can do to raise your credit score and, in turn, get a better shot at a good interest rate on your next credit card. Because if a low credit card APR is your objective, it truly pays to have an “excellent” credit score of 750 or higher.

To choose the best low-interest credit card offer, start by checking your credit score. Credit cards with low interest rates typically require good or excellent credit for approval. Next, decide what you will use your low interest credit card for – everyday spending, a big purchase or a balance transfer. That will tell you what type of credit card interest rates to focus on.

How to Choose a Low-Interest Credit Card:

1. If you want to reduce the cost of existing debt, focus on the balance transfer APRs – both introductory and ongoing – as well as balance transfer fees when comparing credit card offers.
2. If you want to finance a large purchase with the new card, apply for a general-purpose credit card that has a 0% APR period on purchases. Many cards offer at least 12 months of no interest. It’s much better than deferred interest, which is a feature of many store credit cards.
3. If you want a card that won’t charge much interest on the rare occasion you carry a balance, there are some credit cards that offer rates below 12% to people with good or excellent credit. But it’s still best to pay off everyday expenses in full each month, so it might be worth using the Island Approach, i.e. multiple credit cards that work for different types of purchases.

Whatever reason you have for seeking out a low-interest credit card, it’s important to remember that carrying a balance on a credit card can be a slippery slope, even at a low interest rate. And if you have a 0% APR credit card, don’t wait until the end of the intro period to figure out how to pay off your balance. Use a credit card payoff calculator to plan your payment amounts ahead of time.

You can save money with a low-interest credit card by paying less interest on a balance carried month-to-month or by transferring a balance from a high-interest card to a low-interest card. In certain situations, a 0% APR credit card is a better option than a low-interest credit card for saving money while paying down a debt.

Saving money while carrying a balance

Cardholders who tend to carry a balance from month to month will definitely save money on interest with a low-interest credit card. The average credit card interest rate is high - around 19% for new offers - so shopping around for a low-interest credit card will pay off for people who frequently carry a balance.

A 0% APR credit card can save a balance-carrier money, too. If you plan to get a no interest credit card, make sure you also have a plan to pay off any carried balances before the end of the intro period. Intro APR periods expire, often leading to a higher-than-average regular APR.

Saving money on a balance transfer

Saving money on a balance transfer can be tricky, but a low-interest credit card can certainly help. To save money in the end, a balance transfer must save you money on interest, and the balance transfer fee must be less than the amount you’re saving in interest. As long as the new card’s APR is lower than the current card’s APR - and the balance transfer fee doesn’t negate your interest savings - you will save money as you pay off the transfer.

If you know you can pay off the transferred balance in a year or so, you may benefit from a 0% APR balance transfer credit card. Some balance transfer cards have no balance transfer fee, which will make saving money even easier.

Tips for saving money with a low-interest credit card:

1. Using a credit card payoff calculator will tell you how much to pay every month to pay off your balance in a certain amount of time, both with your current interest rate and offers for lower APRs that might be available.
2. Keep in mind that the lowest interest credit cards require excellent credit and most 0% APR credit cards require at least good credit. If you’re not sure what your credit score looks like, check it for free on WalletHub.
3. If you already have a credit card, but you don’t like the interest rate, try giving the card issuer a call to ask for a lower rate. Your odds are better if you have a long and positive history with the issuer.

To get a low-interest credit card, you’ll need good credit or better, and you’ll want some idea of what you’re going to use the card for. That will determine which cards you’re likely to qualify for and which interest rates you should focus on when comparing offers. For example, you might be able to get a 0% introductory APR, or you might want a low regular APR. And you might be better off with a low balance transfer rate than a low purchase APR, if you have existing debt.

So, start by checking your credit score and figuring out how long you expect to need a low interest rate, in addition to what you need it for. Most credit card companies offer low interest rates, at least to some applicants for certain cards. But finding the right fit for you can be difficult at times.

How do you know what APR you’ll get?

As a rule of thumb, the best credit scores get the lowest APRs. But all interest rates on credit cards are not created equal. Credit cards offering a low- or no-interest intro period will grant you the advertised intro APR as long as you’re approved for the card. But beware – those intro APR periods are usually followed by high regular APRs, and that’s the APR you’ll be stuck with.

Most credit cards advertise their regular APRs as a range: 15% - 25% (V), for example. That means your assigned rate could be as low as 15%, as high as 25%, or somewhere in between. And the “(V)” indicates the rate could change over time as economic conditions evolve. The exact interest rate you’re given (from within the advertised range) will depend on your credit history, income, and debt – your overall creditworthiness.

Unless you apply for a card that has a set regular APR, rather than one advertised as a range, you won’t know exactly what regular APR you’ll get until your application is accepted. As a result, it’s best to consider both the high and low ends of the range when comparing credit card rates, even if you have good credit. The average regular APR for people with good credit is still nearly 21%, and credit cards that require a minimum of good credit for approval commonly have APRs that range from 16% to 25%.

If you’re worried about winding up with a higher regular APR than you’d like, there are still a few ways you can go about paying less interest. With some cards, you can avoid regular APR altogether for a set period of time.

Using a 0% APR period to pay off debt

If you have an existing debt and need a break on interest to pay it down faster, look for a 0% balance transfer credit card. Most 0% APR balance transfer credit cards charge a balance transfer fee, which is a percentage of the amount you transfer. In this case, a balance transfer isn’t totally free. That said, there are cards with no balance transfer fee and 0% APR periods, but they’re not common.

Using a 0% APR period to finance a large purchase

If you’re looking to make a big purchase without paying interest, you’ll want a credit card with a 0% APR intro period on purchases. The intro period will allow you to pay off a hefty purchase without paying an extra dime, as long as you pay it off before the intro period ends. Interest will apply to any balance remaining at that point.

Using a low-interest credit card as a safety net

If you simply want a low-interest credit card to have one just in case – of emergency car repairs, surprise medical bills or other situations where you won’t be able to pay the bill in full right away – look for a card with a low APR range, or one with a single rate listed. Most credit cards offer APR ranges rather than a single rate, and you can’t just assume you’ll get a rate at the low end of the advertised range. But the better your credit history is, the more likely that will be.

If you already have a high-APR credit card, a better option might be to try calling your credit card company’s customer service line to ask for a lower regular rate should the need arise. If you make a good case, citing your good and/or long history with your card and the company, you may get offered a lower interest rate.

The best low interest credit cards for excellent credit are the Costco Anywhere Visa Credit Card, the Amalgamated Bank of Chicago Union Strong Credit Card, and the Dollar Bank Low Rate Credit Card. They all have interest rates below 16%.

There are other credit cards with the possibility of lower interest rates for people with excellent credit, but the lowest rates offered in an interest rate range aren’t guaranteed. The credit cards listed above don’t have an interest rate range, which means a cardholder will know the rate they’ll get before they apply for the card.

It’s important to note, however, that the interest rates for these credit cards are variable, meaning that the rate can go up or down depending on changes to the index rate the card is attached to. The index rate usually fluctuates along with the Federal Reserve interest rate.

The best low interest credit cards for excellent credit:

• Costco Anywhere Visa: Regular APR of 15.24% (V). Excellent required. No intro APR period. $0 annual fee.
• Amalgamated Bank of Chicago Union Strong: Regular APR of 9.25% (V). Good required. Intro APR of 0% for 12 months on purchases and 0% for 18 months on balance transfers. $0 annual fee.
• Dollar Bank Low Rate: Regular APR of 9.24% (V). Excellent required. Intro APR of 0% for 6 months on purchases and 0% for 6 months on balance transfers. $0 annual fee.

When shopping for a low interest credit card, it’s worth considering credit cards with 0% APR periods, especially if you’re looking to make a big purchase and carry a balance for awhile. Many credit cards with 0% APR intro periods don’t even require excellent credit. But do keep in mind that many 0% APR credit cards have high regular interest rates, so make sure to pay off any carried balance before the intro APR period ends.

The best low interest credit card for fair credit is the Petal Visa Credit Card because it is possible to get an interest rate below 15%, depending on your overall creditworthiness. That is the low end of a range from 12.99% to 29.49% (V), however, so it might be optimistic to assume you’ll get a rate that low. The Petal Card’s annual fee is $0.

It’s worth mentioning that when you have fair credit, getting a credit card with a low APR may not be the best option. Fair credit won’t qualify you for too many of the 0% APR deals offered by a lot of credit cards these days. And with a fair credit score, you probably won’t get the lowest APR available from the Petal Visa Credit Card.

Store credit cards can offer deferred interest to people with fair credit. But you should be careful with deferred interest deals – if you don’t pay the full amount by the time the deferred interest period is over, you’ll owe your balance plus all the interest you would have accrued since you made the purchase.

The higher a credit card applicant’s credit score is, the more likely the applicant is to get approved for a low interest rate. People with “excellent” credit scores will generally qualify for the best (lowest) interest rates, while people with “bad” credit will end up with higher interest rates. But credit scores are only part of the information card issuers use to determine an applicant’s interest rate. They also look at an applicant’s annual income and full credit report, which includes payment history and open accounts.

An interest rate is assigned when a credit card application is approved. So if your credit score goes down in the future, your interest rate won’t necessarily hit the roof. If the card issuer does raise your rate, they must send you a notice 45 days before it goes into effect. Plus, it can only apply to new purchases, so if you don’t want to pay the new rate, you can simply stop using the card within 14 days after you receive the notice. That way, there will be no purchases on your next statement that have the new APR.

Credit scores also play a big part in loan interest rates. Better credit scores will get better mortgage interest rates, for example, while a credit score in the lower 600s may make it difficult to get a mortgage at all. Having a high credit score can save a borrower thousands of dollars in interest over the life of a mortgage, so it’s absolutely worth it to improve your credit score before going mortgage shopping.

To avoid interest on a credit card, either pay the full statement balance by the due date every billing period or maintain a $0 balance by not charging any purchases to your credit card account. There is no revolving balance for a credit card’s interest rate to apply to in either case.

More specifically, it’s impossible to owe interest without buying anything, and even a card with no balance reports positive information to the credit bureaus every month. Alternatively, making purchases and paying off the full balance listed on the monthly statement by the due date avoids interest thanks to the so-called “grace period” that most cards have. That basically means people who consistently pay their bill in full get an opportunity to do so before interest applies to their purchases.

But interest is most often a concern when you need to buy something now but won’t have all the money for a while. And in that case, the best way to avoid interest on a credit card is to get a card with a 0% introductory APR. Keep reading below to learn more about that option and the rest of the best ways to avoid credit card interest charges.

How to Avoid Interest on Credit Cards:

1. Don’t make purchases, balance transfers or cash advances. Not using your card guarantees no interest, as long as you pay any annual or monthly fees it may charge. And the issuer will still report positive information to the credit bureaus each month.
2. Schedule monthly payments for your full statement balance. As long as you always pay the full balance listed on your monthly statement by the due date, the issuer won’t charge interest. Set up automatic monthly payments from a bank account for the full balance so you don’t need to remember. Just make sure your bank account balance exceeds the amount you charge.
3. Use a 0% credit card, and get out of debt before the regular APR kicks in. Lots of credit cards offer 0% intro rates on purchases, balance transfers or both for a certain number of months after account opening. Your balance won’t accrue interest during that period if you make the minimum payment each month. After the 0% rate expires, the regular interest rate kicks in.

Final Thoughts

It’s not too hard to avoid interest on a credit card if you know what to do. If you’re in the market for a new card and need to finance a big purchase, getting a 0% card is the best option. If you already have debt, you can move the balance to a 0% balance transfer card and pay it off before the intro period expires. WalletHub’s credit card payoff calculator can help you.

Fixed low interest 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.

There aren’t any no interest credit cards for 24 months right now. The closest you’ll find is no interest for 21 months on balance transfers from Citi Diamond Preferred, which charges a 5% balance transfer fee. The longest you can get no interest on purchases from a credit card is 20 months, with the U.S. Bank Visa Platinum card. Plus, there are several credit cards with no interest for 18 months, either on purchases, balance transfers or both.

Some store cards may offer no interest for 24 months or longer. But that’s deferred interest, not true 0% interest. With deferred interest, if you don’t pay off your entire balance by the end of the promotional period, you owe all the interest you would have built up over those months at the card’s regular APR. If you do pay in full by the time the 0% period ends, you don’t owe the interest.

Here are the best alternatives to no interest credit cards for 24 months:

• No interest for 21 months on balance transfers: Citi Diamond Preferred. 5% balance transfer fee. No interest for 12 months on purchases. No annual fee. Good credit needed.
• No interest for 20 months on purchases and balance transfers: U.S. Bank Visa Platinum. 3% balance transfer fee. No annual fee. Excellent credit needed.
• No interest for 18 months on purchases and balance transfers: Citi Simplicity. 5% balance transfer fee. No annual fee. Good credit needed.
• No interest for 18 months on purchases and balance transfers: HSBC Gold Mastercard. 4% balance transfer fee. No annual fee. Good credit needed.

• No interest for 18 months on purchases and balance transfers: Santander Bank Sphere Credit Card. 4% balance transfer fee. No annual fee. Excellent credit needed.
• No interest for 15 months on purchases and balance transfers: Chase Freedom Unlimited. 5% balance transfer fee. No annual fee. Excellent credit needed.
• No interest for 15 months on purchases and balance transfers: Amex EveryDay. No balance transfer fee if transfer made in the first 60 days. No annual fee. Good credit needed.
• No interest for 15 months on purchases and balance transfers: BankAmericard for Students. No balance transfer fee if transfer made in the first 60 days. No annual fee. For limited/fair credit.

So there are a number of good alternatives to no interest credit cards for 24 months. The only catch is that you’ll need to have good or excellent credit to get them, with the exception of BankAmericard for Students.