When it comes to interest rates on credit cards, lower is always better. The higher your interest rate, the more money you're at risk of owing if your balance grows out of control.
Unfortunately, credit cards with low interest rates aren't very popular with banks. But that doesn't mean a low interest rate credit card is impossible to find. Quite the opposite.
There are many low interest credit cards out there. These can range from balance transfer cards that offer 0% APR for a period of time up to cards with 10% purchase rates. The card you decide on ultimately will depend on what you need the most for your finances right now.
We've scoured the web to find out which are the best low interest rate credit cards out there:
Best Low-Interest Credit Card For Paying Off Debt
Chase Slate® Credit Card
If you're looking to consolidate your debt, the Chase Slate® credit card is a great option. With this card, you can get 0% interest on purchases and balance transfers for 18 months. And if you make your balance transfer within the first 60 days, you get it for no fee.
With 18 months at no interest, you have a year and a half to put payments down on your debt that go straight to the balance. That's an excellent way to chip away at large credit card debt.
How Interest Charges Keep You in Debt
With credit cards, interest is the culprit that holds you in debt. If you didn’t have those ever-mounting charges, you'd be able to pay down the balance faster. Credit cards that offer temporary 0% APR introductory periods can be used for balance transfers. That means you can move your debt from one credit card to another to pay it off faster. These introductory periods usually range anywhere from 6-24 months.
Unlike purchases, balance transfers can accrue interest immediately. That's in addition to a fee of up to 3% of the transferred amount. Some cards waive this fee during an introductory period, while a rare few such as Chase Slate® waive balance transfer fees altogether.
Credit Scores Needed for a Balance Transfer Credit Card
The ideal card for debt payoff would have a 0% APR introductory period and no balance transfer fee. This type of balance transfer credit card tends to require relatively good credit. A good credit score, as determined by FICO ranges from 700 to 749 out of 850.
Good credit does not mean an absence of debt. If you have not defaulted on any loans, you can still score well. Even carrying large amounts of debt load won't hurt your chances of approval. Keep your credit usage to less than 30% of your total credit card limit to keep your credit score high.
Balance transfers can be initiated as soon as you qualify for the new credit card. The actual transfer takes 7 to 10 business days to complete. To ensure maximum effectiveness of a balance transfer, you should avoid making new purchases or cash advances on the credit card. Those will not only come at a different interest rate than the transfer, but they can also cause you to grow the balance you're trying to shrink.
Balance transfers can be used to consolidate other kinds of debt (e.g., student loans, personal loans, etc.) in addition to credit card balances. Card issuers may occasionally send balance transfer checks that can be used to pay off other debt with your card. (These will still be subject to the 3% fee, which could negate the benefits of a balance transfer). Theoretically, you can continue to roll over your debt to new credit cards with balance transfers again and again. Some people do this to extend the period they have to repay the debt at a lower interest rate.
If you're thinking of a balance transfer, keep one thing in mind. Some cards will charge the new rate retroactively on your remaining balance when the introductory rate expires. This could cost you big on the progress you made paying off the balance up until that point. Therefore, if you know you'll need another balance transfer, take care of it before that introductory rate officially expires.
Lowest Interest Rate Credit Card For Excellent Credit Scores
Simmons Bank Visa® Platinum for the lowest APR
There is one credit card at least that offers no balance transfer fees and has a low purchase interest rate. Plus, there's no annual fee. That's the Simmons Bank Visa® Platinum card.
But you should note, Simmons Bank only accepts applicants with excellent credit. (For example, a score of 750 or higher.) For some, it may take a few years of working on their credit to qualify for this card.
Rules that Affect Credit Card APRs
Although there are no federal laws limiting credit card interest rates, state laws might cap these rates. Generally, you won’t find a credit card with an interest rate higher than 29.99%. That also happens to be the rate commonly used as the penalty APR. The penalty APR is the new (higher) rate you would get if you miss a payment or exceed your credit limit.
Under federal law, credit card companies must show the card’s APR on its terms and conditions. Card applicants with high credit scores tend to qualify for the lower end of the APR range.
Low APR credit cards may charge less interest, but they don’t usually offer rewards. Great rewards credit cards will have programs that offer cash back, points, and miles, but their APRs will be a little higher. If rewards are mainly what you're looking for, this is something to consider.
Best Card for Bad Credit Scores
First Progress Platinum Prestige MasterCard®
If you don't have outstanding credit and want a low interest credit card, there is a great option for you. That's The First Progress Platinum Prestige MasterCard® Secured Card.
This is a secured card and therefore doesn’t require outstanding credit. And it offers a respectable APR of 11.99%, lower than most other secured credit cards. It does, however, come with an annual fee of $44. This is not uncommon for a secured credit card.
Secured Credit Cards with Low Interest Rates for Bad Credit
The alternative for people with bad credit is a secured credit card. The type of credit card represented by First Progress Platinum Prestige MasterCard® can be used for purchases in the same way as any other regular credit card. The only difference is this card (and all secured cards) requires a security deposit as collateral. Normally, the amount of the security deposit is the amount of the card’s credit limit. Your credit limit, in addition to all activity with the secured credit card, is reported to the credit bureaus. If you practice positive credit behavior, this will help you build or repair your credit.
Qualifications for secured credit cards are less reliant on your credit score. Indeed, your credit report may not even be pulled in your evaluation for these cards. After 6-12 months of having any credit card, you could call your bank to negotiate a lower APR. As long as you've shown responsible usage of the card along with on-time payments, this could work. Card issuers are more likely to decrease your interest rate if your credit score has improved since you got the card.
How Credit Card Interest is Calculated
Even the lowest APRs on credit cards may appear high compared to the interest rates on other types of loans. The reason is because credit cards are not tied to any form of collateral. (Unlike the homes and vehicles that are financed by mortgages and car loans that can be taken by the bank in case of default).
The APR for your credit card can vary depending on your credit score. The higher your credit score, the lower your interest rates.
It should also be noted the credit card interest rate that you end up with is calculated by the card company’s formula. Most commonly, card companies start with The Wall Street Journal's Prime Rate. Then, depending on your creditworthiness, card issuers adds a certain percentage to that rate. The riskier you are as a borrower, the larger the amount that is added to the Prime Rate.
Using Your Credit Card to Improve Your Credit Score
Bad credit, excellent credit, no credit or digging out of debt. Opening one of the above credit cards can be a perfect opportunity to building your credit. Keep some of these tips in mind:
1. Use Credit Cards like Debit Cards
Naturally, debit cards and credit cards differ in one basic way. With the former, you’re spending money you already have in your checking account. For the latter, the money you spend is not yours; it’s borrowed and must be repaid. The difference between how the two card types work is what causes credit card debt to get out of control. Sometimes, people forget how much they’ve charged to their credit card.
One solution is to treat your credit card as you would a debit card. Before swiping your credit card, ask yourself one question. “Would I be able to afford this purchase on my debit card without going overdraft?” Make a habit of this, and it keeps your credit card balance low, and easier to pay off. It also maintains a low credit-to-debt ratio. Each of these things reflects positively on your credit report.
2. Make Smaller “Micropayments” Each Month
There doesn’t have to be an all-or-nothing approach to paying off your credit card bill. Paying it off in full each due date is recommended. Making partial, late, or zero payments isn’t ideal. One way to make your balance work to the benefit of your credit is to make smaller payments throughout the month. These payments (also called micropayments), can lower your debt utilization ratio. At the same time, they keep a healthy amount of active credit on your card.
This will also show up on your report as evidence that you’re using your credit card responsibly. Time your payments so that you’ve paid off your full balance by the end of the billing cycle.
3. Ask for More Credit
Asking for a higher credit line does not necessarily result in more debt. While you’ll always want to keep your debt utilization on the lower end, increasing your credit limit can help boost your credit score. That's because it shows your credit card provider that you can manage a higher balance. Plus, those low-interest rates stay where they are.
However, if you request an increase, the application process includes a hard check to your credit. This can ding your score - not a good idea if your credit is low. If you’re confident that it’s in good shape, go for the higher credit limit. The good thing about it is that it not only can boost your credit, you’re not obligated to utilize all of it.
4. Be Predictable
Don’t go overboard with too many changes to your credit profile. Opening too many accounts or asking for too much credit may make you look like a risky borrower to your lender.
Keep things predictable. While you shouldn’t open too many new accounts, don’t close any old ones. Also, don’t use one credit card only and neglect the others. Instead, find an even balance between all your accounts. Despite the attractive interest rates and bonuses built into the cards above, it’s unwise to sign up, get your perks, and close out your card. That can make a bad impression on your card provider, but also your credit.
Credit Cards for Low Interest
|Best Low Interest Credit Cards||Notable Feature||Who It's Best For|
|Chase Slate®||Introductory offer tends to include 0% APR on balance transfers for an extended period of time. Also, balance transfer fees are waived during the first 60 days||People who are trying to pay down their high-interest debt quickly through the use of debt consolidation.|
|Simmons Bank Visa® Platinum||An extremely low regular APR.||People want to minimize their interest charges and don't care about rewards.|
|First Progress Platinum Prestige||Low APR for a secured credit card.||People with bad credit who might carry a balance occasionally.|