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Low interest rate credit cards

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. Since the interest rate on the credit card is low, your monthly finance charges and minimum payment will be lower than higher-rate cards.

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 of 20.3%. 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.

How can 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.

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 residential address or further details about your income. If your application is turned down, you will typically find out in a letter or via email after several days.

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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 minimising 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. This is the most important factor to look for with a low interest rate credit card. The lower the rate, the better it will be for you. 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 minimise 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 Euros. 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 which interest rate to approve you for. Here are a few reasons why your credit card application might be denied.

  • 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.
  • 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 to get approved for a lower-rate card.
  • High credit card balances. Credit card issuers look unfavourably on applicants with lots of outstanding debt. If your existing credit card balances are too high, especially compared to your credit limits, your application could be denied.
  • 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 several credit cards or loans within a short space of time. 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.
  • 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 the credit card.

Being denied a low interest rate credit card isn’t personal.

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.

What should I 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. Avoid these mistakes to stay on track:

  • Making only the minimum payment. Even 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 a payment. If you miss your monthly repayment, your credit card issuer will put your account into arrears. You could be given a penalty and be charged more interest. Your minimum repayment will increase as a result and your overall credit history could be negatively affected.
  • Confusing introductory rate and low interest rate. While 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 ends, the interest rate will increase to the standard rate of interest. On a low interest rate credit card, there is no time limit on the low interest rate.
  • Taking out a cash advance. A cash advance is one of the most expensive types of credit card transactions. You’ll pay an ATM fee, a cash advance fee, and possibly even a higher interest rate.

Pros and cons of low interest rate credit cards

Pros

  • You will pay less interest on purchases, which will make it easier to manage your credit card debt.
  • Many low rate cards also have low, if not zero, annual fees.
  • Many low rate cards do not have introductory offer rates – meaning that their rates will stay low indefinitely and there’s no need to set yourself a calendar reminder to switch when the rate expires and reverts to the standard interest rate.
  • You can often combine low rate cards with other features such as balance transfers or zero foreign transaction fees.

Cons

  • You’re less likely to receive reward points and other perks.
  • You may not qualify if you have a poor credit history.
  • That low rate is usually a variable one – so while it’s likely to stay low, nothing’s guaranteed.

Bottom line

If you tend to carry a balance rather than paying your credit card bill off in full each month, a low interest credit card could help you save on additional fees and charges. Just remember to consider the other features of the card – such as introductory offers, annual fees, and complimentary extras – to help you find a card that best suits your needs.

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