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Compare Low Interest
Credit Cards

Are you carrying a credit card balance month-to-month? Find the lowest interest rate credit cards and make your balance more manageable.

See the best low interest credit cards Sep 19, 2020

What are low interest credit cards?

If you tend to carry a credit card balance from month to month, having a low interest credit card will help you save money on interest charges. The average credit card interest rate is 19.99%, which is a high-interest rate for a recurring credit card balance. Having a high-interest credit card means you’re paying a lot of extra money on interest, money you could be saving if you switched to a low annual interest rate credit card. Like their name indicated, low interest credit cards come with much lower interest rates, sometimes as low as 4.99%.

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How will a low interest credit card help me save money?

With a low interest credit card, you can pay off your credit card balance faster. This is because more of your monthly payment is being put towards your balance instead of the interest.

Standard credit cards come with an interest rate ranging from 19.99%-22.99%, while low interest cards can be as low as 4.99% to 15.99%.

Let’s see an example of how much interest you can save by switching to a low interest credit card.

Let’s say:

  • You owe a $1500 balance on your credit card
  • Every month, you choose to pay $150 towards your credit card statement
Example of how a low interest credit card can help you save money
Typical credit card Low interest credit card
Annual interest rate 19.99% 8.99%
Monthly interest rate 1.67% 0.74%
Months until your balance is paid in full 12 11
Total interest paid $154.49 $65.13

Over the time period it take to pay down the $1500, in $150 payments every month you will have been charged $154 in interest under a traditional credit card vs the $65 under the low interest credit card. When you choose the low interest credit card, you pay less in interest. In this example, you save $89.36 in total interest, which would help you to pay off your balance a month faster compared to using the standard rate credit card.

Disclaimer: This is a simplified example for illustrative purposes to help you understand how interest charges on credit cards may add up.

Is a low interest credit card right for you? Here’s what you need to know

What are the most common features of low interest credit cards?

Most low interest credit cards come with a no annual fee, and typically no rewards. This is because they are specifically designed to make it easier for you to pay your recurring credit balance. Most low interest credit cards do not offer perks though because the low interest rate itself is considered the perk.

When is the best time to use a low interest credit card?

The best time to use a low interest credit card is when you have a high recurring credit balance to pay off. While comparing low interest credit cards, look for a great promotional interest rate to take advantage of.

What is the difference between fixed rate and variable rate credit cards?

When you’re comparing low interest credit cards, you’ll notice that there are two types, fixed rate credit cards and variable rate credit cards.

A fixed rate low interest credit card has the same interest rate throughout the year, while the variable rate low interest credit card has a fluctuating interest rate. This variation depends on two important factors, one being the bank’s current prime rate and the second being your credit score. If you have a low credit score (below 600), you may not be able to take advantage of some of the interest rate discounts that come with the variable rate, low interest credit card.

  • Fixed rate credit cards - The benefit of fixed rate credit cards is that you’ll know what interest rate you’ll be charged every billing cycle. The rate of interest won’t be affected by the bank’s prime rate or your creditworthiness. Fixed rate credit cards usually come with limited-time balance transfer promotions you can use pay off your existing credit card debt.
  • Variable rate credit cards - The advantage of holding a variable rate credit card is that you can get a very low rate (even lower than a fixed rate card in some cases), but this usually only comes with excellent credit. The disadvantage is that you might be stuck with a higher rate if your credit score isn’t great or if the bank’s prime rate increases.

If you have a credit score lower than 670, stick to a fixed rate, low interest credit card.

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