Low Interest Rate Credit Cards

Save money on interest: Low interest rate credit cards offer long-lasting low interest rates on purchases. Here’s how you can choose the right card.

A low interest rate credit card helps you save money by applying a low interest rate to your credit card balance. If you’re a credit card user with excellent credit who carries a balance from month to month rather than always paying off your debt in full, a low interest rate credit card may be the best credit card for you. Because the interest rate on the credit card is low, your monthly finances charges and minimum payment will be lower than for higher-rate cards.

What’s in this guide?

What is a low interest rate credit card?

A low interest rate credit card is a card that has an interest rate lower than the average credit card APR of 18%. When you carry a balance on a low interest rate credit card, your monthly finance charges are lower than they would be if you had a higher interest rate.

Many low interest rate credit cards have multiple interest rates – a low interest rate, a high interest rate, and a third intermediate rate in the middle of the two. The credit card issuer uses your credit history to determine which of the rates you qualify for.

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Common concerns about low interest credit cards

How do I qualify for a low interest rate credit card? To qualify for a low interest rate credit card, you need to have excellent credit, which is indicated by a higher credit score. Without excellent credit, you’ll likely only qualify for a higher interest rate. You also need to meet the credit card issuer’s minimum income qualifications. We can’t tell you the exact monthly income you need to have for a specific card because credit card issuers don’t make this information available.

When will I find out if I’m approved?

Many online credit card applications will give a decision to you within 60 to 90 seconds after you submit your application. In some situations, it may take a few days to learn whether you’re approved. This can happen if the credit card issuer needs to collect additional information from you. For example, the credit card issuer may need your street address or income documentation. If your application is turned down, you will typically find out in a letter or via email after several days.

What will my credit limit be?

Your credit limit is the maximum amount you can charge on your credit card without penalty. At the time your application is approved, the credit card issuer will set your credit limit based on your credit rating and income. You may be able to get periodic credit limit increases if you use your credit card responsibly, make your payments on time, and alert your credit card issuer to any income increases.

Will my interest rate ever change?

There are certain circumstances where credit card issuers will raise the interest rate on a low interest rate credit card.

  • The underlying interest rate changes. Most credit cards have a variable interest rate. This means the interest rate is tied to  the prime rate, based on the rates set by the Federal Reserve. When the index rate moves, the rate on your credit card moves, too. If the Federal Reserve increases interest rates, the APR on your low interest rate credit card will also increase. However, the interest rates of other credit cards will also increase so your APR will still likely be lower than the current average.
  • You miss two payments in a row. If you are more than 60 days behind on your credit card payment, your interest rate can increase as a penalty. As long as you make the next six payments on time, your interest rate will go back down for any charges you made before your rate increased. Your credit card issuer may still apply the higher interest rate to any new purchases you make during that period.

Your credit card issuer can raise your interest rate under other circumstances, but you must be given a 45-day advance notice before your rate can increase. You can reject the interest rate increase and pay off your balance at the lower interest rate, but your credit card issuer can, in turn, close your account.

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What you need to know to compare low interest credit cards

There are many low interest rate credit cards available. Choosing the right one is important for minimizing your payments. Read through the credit card disclosure for all the credit cards you’re considering to identify important product information and review our tables for all the key details you need to compare. Here are some of the most important factors to consider when you’re comparing low interest rate credit cards.

  • Purchases APR. This is the most important factor to look for with a low interest rate credit card. The lower the APR, the better. If the credit card advertises multiple interest rates, keep in mind that you’ll need to have excellent credit to be approved for the lowest interest rate.
  • Annual fee. Some credit cards charge an annual fee. A credit card with no annual fee is a better deal because you can minimize the cost of having a credit card and carrying a balance. An annual fee on your credit card can negate the benefit of having a low interest rate. If a credit card has an annual fee, look for other perks that justify paying the fee.
  • Other fees. Your credit card may charge fees for certain transactions. For example, you will incur a balance transfer fee if you transfer a balance or a cash advance fee if you take out a cash advance. You might also pay a foreign transaction fee if you make purchases in a currency other than US dollars. Choose a card that doesn’t impose fees for any transactions you commonly make.
  • Other perks. A low interest rate credit card may come with other perks like the ability to earn rewards on purchases, purchase or price protection, extended warranty, car rental insurance, and free access to your credit score. Pay close attention to extra credit card benefits, especially if you’re trying to decide between two similar credit cards.

Why might my credit card application be denied?

When you apply for a low interest rate credit card, the credit card issuer will look at your credit history and information on your credit card application to decide whether to approve your application and the interest rate to approve you for. Here are a few reasons that your credit card application might be denied.

  1. Less than excellent credit. Typically, only applicants with excellent credit — generally with credit scores 720 and above — are approved for low interest rate credit cards. If your credit score falls below the credit card issuer’s cutoff for that credit card, you may be approved but for a higher interest rate, or your application may be denied altogether.
  2. A recent late payment. A single late payment may not cause your credit score to drop out of the excellent range, especially if your credit history is otherwise spotless. However, your credit card application could be denied if you’ve been late within the past few months. After several months of making all your payments on time, the late payment will lose significance and you may be able get approved for a lower-rate card.
  3. High credit card balances. Credit card issuers look unfavorably on applicants with lots of outstanding debt. If your existing credit card balances are too high, especially compared to your credit limits, you application could be denied.
  4. Too many recent applications. Even if the applications don’t hurt your credit score, you could be turned down for a low interest rate credit card if you’ve applied for too many credit cards or loans recently. Space out your credit card applications so credit card issuers won’t get the impression that you’re taking on too much credit too soon.
  5. Low income. Credit card issuers have income standards for each credit card. If the income on your application doesn’t fit the credit card issuer’s criteria, you could be denied for the credit card.

Being denied isn’t personal. Expect the credit card issuer to send a letter in the mail informing you of the reasons you were denied. This letter will include a free credit score or instructions for ordering a free copy of your credit report, if your credit history played a role in the decision to deny your credit card application.

If you don’t qualify for a low interest rate credit card, you can still save money on interest by paying your balance in full each month. This allows you to completely avoid finance charges and interest on your balance.

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Mistakes to avoid with low interest rate credit cards

A low interest rate credit card lowers the amount of interest you pay on outstanding credit card balances. But, if you’re not careful, you can still make mistakes that hurt your credit rating or get you into debt.

Making only the minimum paymentEven though you have a low interest rate and your finance charges will be lower, it’s better to pay more than the minimum each month. You’ll pay off your balance faster, save money on interest, and free up available credit.
Missing two payments in six months If you miss two consecutive monthly payments, your credit card issuer will raise your interest rate to the penalty rate. The penalty rate is the highest interest rate on your credit card. Your minimum payment and finance charges will increase as a result.
Your credit card issuer is required to lower your interest rate if you make six consecutive timely payments, but only for your existing balance. Depending on your credit card terms, any purchases you make after the penalty rate became effective may still receive the penalty rate.
Confusing introductory rate and low interest rateWhile an introductory rate is technically a low interest rate, credit cards with an introductory rate aren’t considered “low interest rate credit cards.” This is true even if the low introductory rate applies to purchases. A credit card with an introductory rate will only have a low interest rate for a limited amount of time. Once that period passes, the interest rate increases. On a low interest rate credit card, there is no time limit on the low interest rate.
Taking out a cash advanceA cash advance is one of the most expensive types of credit card transactions. You’ll pay an ATM fee, a cash advance fee, and a higher interest rate. Plus, the interest on cash advances starts accruing right away. Only what you pay over the minimum will be applied to the higher rate cash advance.
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Military low interest rate credit cards

Aside from the everyday perks of military credit cards like low interest and the ability to waive certain fees, it’s important for service members to understand SRCA. The men and women who serve are risking everything to protect the United States, so naturally there are some laws in place to protect them from financial burdens back home. The law is called The Servicemembers Civil Relief Act (SRCA). Originally passed in 1918, then rewritten in 1940 and 2003, offers a low interest cap to all loans incurred by service members. The interest rate is capped at 6 percent, and it includes all debt including credit cards.

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Frequently asked questions

Credit card issuers use risk-based pricing to set interest rates for credit cards. Risk is largely gauged by credit score. Consumers with low credit scores are considered to be riskier because of past credit mistakes. These consumers will pay a higher rate when borrowing to compensate for the risk that they may fall behind on payments. Consumers with high credit scores, on the other hand, are considered to be less risky because they have demonstrated good payment habits. These consumers are able to borrow money at a lower interest rate.

A low interest rate credit card is most beneficial if you tend to carry a credit card balance – meaning you don’t pay in full each month. If you prefer to pay your balance in full, a rewards credit card may be a better option.

You may find it preferable to use your low interest rate credit card as your primary credit card because your finance charge will be lower. You can leave your other credit cards open, but be aware of your overall credit card purchasing habits.

A low interest rate credit card generally has a low APR (Annual Percentage Rate) for the life of the credit card. A balance transfer credit card only has a low interest rate for a specific time period, beginning when you open the credit card account. After the initial introductory period expires on a balance transfer credit card, your interest rate will increase. The interest rate on a low interest rate credit card generally lasts the life of your credit card.

Among the credit cards marketed specifically to students, the standard APR is 14.24% to 24.24%. However, if you’re a student you can still apply for a low interest credit card so long as you have a reliable source of income and good creditworthiness.

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