Choosing between a credit card with a low APR and a credit card with great rewards is a common dilemma for a consumer. The right choice will vary on the consumer’s spending and debt management habits.

Trade-Offs of Low APR vs. Great Rewards

Every credit card exists to create a profit for the credit card company that issues it. With every purchase on a credit card, the consumer is taking out a loan where the lender expects to earn interest on the amount lent.

Low APR credit cards charge low interest rates on balances carried over month to month but don’t usually offer rewards. Great rewards credit cards will award perks such as cash back and points for gift cards and airline miles but the APR will be rather high.

In the eyes of credit card companies, low interest rates are appealing to consumers who tend to carry a balance, thus allowing the issuer to collect interest charges. Great rewards are attractive to consumers who are frequent shoppers but do not carry high credit card balances. Instead, card companies profit from the portion of the card processing interchange fee that merchants pay for every transaction. With either type of credit card, the issuer has a way to make money.

How to Decide Which Type of Credit Card

The determining factor for choosing a low APR credit card or rewards credit card is the tendency to carry a balance. Minimizing the finance charges on a credit card is the primary goal.

Take a look at the comparison between a popular low APR credit card and a popular cash back credit card:

Credit CardAPRRewardsOffer link

Citi Platinum Select Mastercard
11.99% - 20.99%NoneView offer

TrueEarnings® Card from Costco and American Express
15.24% (variable)Cash back - 3% for gasoline (up to $3,000 per year), 3% for restaurants, 2% for travel, and 1% everywhere elseView offer

If you expect to be carrying a balance on a regular basis, a low-interest credit card would be ideal. Earning cash back on all your purchases isn’t financially wise if you are carrying a balance that is charged 15.24% APR, which compounds to even more interest over time.

If you are diligent in paying off your entire credit card balance month after month, a rewards credit card offers the greatest perks. It doesn’t matter if the APR is 11.99% or 15.24% because by paying off the entire balance, card companies will not charge interest and therefore nullifies the relevance of the APR. Instead, take advantage of rewards or cash back credit cards.

An alternate credit card route that requires financial discipline is the use of charge cards, but they are definitely not ideal for every consumer.

To find and compare other low APR and rewards credit cards, visit the credit cards page.

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  • Thanks Simon, I was debating which would be the best decision for my bank’s credit card. I’ll go with the rewards over the lowering apr 🙂