Want to know how to get a low-interest credit card? Here’s how to evaluate each of your options and decide which low-interest credit card is the best for you.
The Bank of America content was last updated on April 1, 2022.
What are low-interest credit cards? It depends on what you’re looking for. Some people want a credit card that offers interest rates well below the industry average. Other people want a credit card with an introductory zero interest rate – and 0% intro APR credit cards are among some of the popular cards on the market. If you’re trying to pay off old credit debt, you might be looking for a balance transfer credit card that offers 0% intro APR on transferred balances.
If you’re thinking about applying for a low-interest credit card, you’ll want to ask yourself what kind of card you’re looking for – and how the card might help you save money on interest charges. Each type of low-interest credit card has its pros and cons, and it’s important to understand how low-interest credit cards work before you fill out any credit card applications. That way, you won’t accidentally end up paying higher interest rates than you were expecting.
Let’s dive into how to evaluate each of your options and decide which low-interest credit card is the best for you.
What are my options for a low-interest card?
If you’re looking for a low-interest credit card, you have three main options to consider – all of which can help you save money on interest charges over time.
First, you could look for a credit card that offers lower interest rates than its competitors. Currently, a credit card that offers interest rates below 16% APR, for example, is likely a good low-interest option.
Second, you could look for a card that offers an introductory zero interest rate. These 0% intro APR cards give you the opportunity to make purchases without accumulating interest charges on your balance – and the best zero-interest credit cards offer intro APR rates that last for a year or more.
Lastly, you could look for a balance transfer credit card. These cards offer temporary zero-interest rates on transferred balances and often extend the 0% intro APR offer to include new purchases as well. If you are trying to pay off old credit card debt, a balance transfer credit card with a zero-interest introductory offer is one of the best ways to pay down your credit card balances while avoiding interest charges.
What is a low-interest credit card?
A low-interest credit card offers lower interest rates than the industry average. Currently, average credit card interest rates are around 16% APR, which means that if you can find a credit card offering interest rates below 16% APR, you have a low-interest credit card on your hands.
We’ve got a list of the best low-interest credit cards to help you get started. Keep in mind that most credit cards offer interest rates in the form of a range – the Discover it® Cash Back card, for example, offers a purchase APR of between 12.24% and 23.24% – and people with better credit are more likely to be offered interest rates in the lower end of that range. This is why it’s a good idea to know your credit score before applying for a low-interest credit card.
What are low-interest cards good for?
Low-interest credit cards are good for people with good credit or excellent credit who occasionally carry a balance on their credit cards. If your credit history is strong enough for you to be offered a credit card with an interest rate below 16%, you can use that low interest rate to finance larger purchases or pay off a balance over time without being overwhelmed by interest charges.
Who shouldn’t get a low-interest card?
If you have average credit or poor credit, you might not get as much benefit out of a low-interest credit card. You’ll probably be offered interest rates at the high end of the card’s interest range if you’re approved for the card – which means that when you carry a balance, your interest charges will be higher than the industry average. That said, it is possible to contact your credit card issuer and request a lower interest rate, especially if you can prove a recent history of responsible credit use.
What are 0% intro APR cards?
Zero percent intro credit cards offer cardholders a temporary interest-free period on new charges. These cards are often called zer0-interest cards – and the best zero-interest credit cards offer introductory rates that last for at least a year. The Bank of America® Unlimited Cash Rewards credit card, for example, offers 0% intro APR on purchases for 15 billing cycles. It also offers 0% intro APR for 15 billing cycles on any balance transfers made within the first 60 days of card ownership, making the Bank of America Unlimited Cash Rewards card both a top 0% intro APR card and a top balance transfer credit card.
What’s an intro APR for credit cards? Essentially, it’s a promotional interest rate that lasts for a certain period of time. When the intro APR runs out, you’ll pay the standard interest rate on any outstanding balances. With the Bank of America Unlimited Cash Rewards card, for example, you’ll pay a variable APR of 14.24% to 24.24%.
What are 0% intro APR cards good for?
Zero percent intro APR cards are good for people who want to cover the costs of a large purchase, such as a vacation or an unexpected bill, and pay off the balance over time. As long as you pay off your balance in full before the zero-interest promotional rate expires, you won’t have to pay interest on any charges made during the promotional period.
Who shouldn’t get a 0% intro APR card?
If you aren’t sure whether you can pay off your balance before the 0% intro APR expires, you might not want to get a 0% intro APR card. Some people treat their zero-interest credit cards as free money – but if you get stuck with a high balance at the end of the zero-interest promotional period, you could end up paying a lot of interest on your charges. If you’re thinking about applying for a 0% intro APR card, make sure you have a plan to pay off any purchases you make on the card before the zero interest rate runs out.
What is a balance transfer card?
What is a balance transfer credit card? Balance transfer credit cards offer the opportunity to transfer old credit card balances onto a new card. Like 0% intro APR cards, balance transfer cards also offer an introductory zero-interest period in which you can pay off those balances without accruing interest charges.
The best balance transfer credit cards offer at least a year of 0% intro APR on balance transfers. The Wells Fargo Active Cash℠ Card, for example, offers 15 months from account opening of 0% intro APR on qualifying balance transfers made within 120 days of opening the account. The Wells Fargo Active Cash also offers 15 months from account opening of 0% intro APR on new purchases, making it a top 0% intro APR card as well – and since its standard APR is a variable 15.24% to 25.24%, it’s also a low-interest balance transfer credit card (for people with high enough credit scores to qualify for the lowest interest rates).
Be aware that balance transfer credit cards charge fees every time you transfer a balance. In most cases, you’ll pay a balance transfer fee of 3% to 5% on all balances you transfer to your card, but many people find that the cost savings associated with the 0% intro APR rate more than cancels out the transfer fees compared to the interest they were accruing on the original card.
What are balance transfer cards good for?
Balance transfer credit cards are good for paying off old debt. In fact, using a balance transfer card to consolidate and pay off debt is one of the most cost-effective debt repayment strategies out there. Once you know how to do a balance transfer, you can transfer your old balances onto your new balance transfer credit card and – with a plan and a budget in place – pay off as much of your balances as possible before the 0% intro APR runs out. In some cases, you might even be able to use a balance transfer credit card to become debt-free.
Who shouldn’t get a balance transfer card?
Like 0% intro APR credit cards, balance transfer credit cards can charge higher-than-average interest rates on any balances that remain after the promotional interest rate ends – so if you’re not sure you can pay off your transferred balances before the 0% intro APR runs out, a balance transfer card might not be the best choice for you.
That said, if you can pay off a significant chunk of your transferred balances before the promotional rate expires, a balance transfer card is still a good idea. Every dollar you pay off at 0% intro APR is a dollar that doesn’t accrue interest.
How do I choose the best low-interest card?
Start by asking yourself what kind of low-interest card is best for you. Do you want a 0% intro APR card that offers zero interest on new purchases for over a year? Are you hoping to use a balance transfer credit card to pay off old debt? Or are you simply looking for a credit card that offers interest rates below the industry average?
Choosing the best low-interest card is all about knowing what options are available and how you can use those options to save money on interest charges. You’ll want to make sure that any low-interest credit card you choose is designed for a person with your credit score – if you are working on building your credit, for example, you might want to use a balance transfer card to pay down old debt (and raise your credit score) before applying for a card that reserves its lowest interest rates for people with good or excellent credit.
Use our guide as a starting point, and remember that there are many different kinds of low-interest credit cards. If you find the right low-interest card for your financial needs, you could end up saving a lot of money.