Low Interest Credit Cards

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Comparing Low Interest Credit Card Offers

By: Laura Mohammad

Updated: April 9, 2018

Low interest credit cards – cards under the national average of 16.62% – are helpful if you plan to carry a balance, making a difference in savings in the amount of hundreds of dollars. Although it's usually best to pay off the balance each month, sometimes that isn't possible. That's where low interest cards come in.

If you want to look at how interest rates work on credit cards, look no further. We crunched the numbers on more than 800 credit cards to determine the best credit cards with low interest rates, and also included information on how to best utilize these cards. Here, we look at:

• CreditCards.com's best low interest credit cards
• Methodology
• What our experts are saying
• What is the average interest rate on a credit card?
• What's the difference between interest and APR?
• How to save money with a low interest credit card
• Why you should avoid keeping a balance on your credit card
• How do you avoid paying interest on a credit card?
• How do you calculate interest on a credit card?
• How does your credit score affect your interest rates?
• How to compare two low interest credit cards
• Further information
• Quick recap

Wondering if you qualify? Want to understand how your score affects your interest rates? We look at that and more.

CreditCards.com's best rated low interest credit cards of 2018:

• Capital One® VentureOne® Rewards Credit Card: Best for travel.
• Blue Cash Everyday® Card from American Express: Best for gas and groceries.
• Discover it® Cashback Match™: Best for online shopping.
• Chase Freedom Unlimited®: Best for flat-rate cash back.
• Citi® Double Cash Card: Best for no annual fee.
• Chase Freedom®: Best for bonus categories.
• Discover it®: Best for balance transfers.
• Citi ThankYou® Preferred Card: Best for dining and entertainment.
• Wells Fargo Cash Wise Visa® Card: Best for sign-up bonus.
• Chase Slate®: Best for purchase protection.

Low interest rate credit cards can help you pay down your debt or reduce interest on large purchases paid off over several months. Low interest credit cards are suitable for those that typically carry a credit card balance from one month to another. Our experts have compiled top low interest credit cards that have different perks and fees.

Methodology

Low interest credit cards analyzed: 869

Criteria used: Regular APR, intro APR, other rates and fees, rewards rates, rewards categories, redemption options, miscellaneous features and benefits, customer service, security, credit needed, ease of application

What Our Experts are Saying

Ginger Dean, personal finance expert
Favorite low interest card: Citi Diamond Preferred credit card
“Overall, the Citi Diamond Preferred card is the best option because of the generous introductory terms and access to premium features, which gives customers peace of mind and a safety net when making purchases.”

Lisa Gerstner, contributing editor at Kiplinger’s Personal Finance
Favorite low interest card: Citi Diamond Preferred card
“Citi Diamond Preferred stands out from the pack because it gives the cardholder the best shot at paying off a big purchase before interest kicks in.”

Stephanie O'Connell, millennial personal finance expert
Favorite low interest card: U.S. Bank Visa Platinum card
“In addition to the 0-percent introductory APR offer on purchases and balance transfers for 18 billing cycles, the U.S Bank Visa Platinum card has no penalty APR, which can be a particularly attractive feature for consumers who may have difficulty staying on top of their payments and are concerned about racking up additional interest.”

Matt Schulz, senior industry analyst at CreditCards.com
Favorite low interest card: U.S. Bank Visa Platinum card
“When you’re paying down debt, every percentage point counts. That’s what makes the U.S. Bank Visa Platinum card appealing.”

Daniel Ray, editor-in-chief at CreditCards.com
Favorite low interest card: U.S. Bank Visa Platinum card
“If you want to avoid interest like the plague, then the U.S. Bank Visa Platinum card gives you the best odds.”

What is the average interest rate on a credit card?

The national average for credit card interest rates is just over 16.5%, although averages for categories can be considerable lower or higher. For example, low interest is under 13.5%, while bad credit is at almost 24%. Here are the most common categories, with their average rates:

Retail cards are among the highest in interest rates, although they have advantages such as loyalty rewards and they will often require lower credit. Retail cards had an average rate of 24.99% in late 2017, according to a CreditCards.com poll. Store-only cards' rates were even higher, at 26.38%, while co-branded cards were at 22.51%. A co-branded card is typically a card within one of 3 major card networks (Visa, Mastercard, American Express) that also carries the store's logo. But it's the rewards programs that make retail cards competitive.

What's the difference between interest and APR?

APR, or annual percentage rate, is the cost of credit expressed as an annual percentage. To determine the monthly periodic rate, divide the APR by 12 months, says Chase. To determine a daily periodic rate, divide the APR by 365 days.

"An interest charge is the sum of interest on your credit card account," says Chase, with the interest charge broken down by transaction type, such as purchases, cash advances and balance transfers. "If you pay less than the full balance, pay after the payment due date (or if your credit card does not have an interest free period) then you will pay interest on those purchases. Cash advances and some balance transfers have no interest free period. This means they start accruing interest as soon as the transaction is made. This will result in interest due, even if your balance is paid in full."

How to save money with a low interest credit card

A high interest rate is one of the biggest culprits in attaining card debt. If you owe $3,000 and you are paying a rate of 16.5% APR, then it would take you 124 months to pay the minimum amount, and you would end up paying $2,122 in interest alone.

One of the biggest surprises about card debt, though, is who the debtor is. A CreditCards.com poll found that, surprisingly, consumers with higher incomes were more likely to have debt than those with lower incomes:

Higher income brackets are more likely to carry a balance...

•  38%
• Income over $50k
•  24%
• Income under $50k

...and for a longer time. After 5 years...

•  27%
• Income over $75k
•  20%
• Income under $75k

CreditCards.com survey

To avoid that debt, the best thing you can do is to pay in full each month. Also, avoid putting charges on your card that you can't pay in full by the due date. Want that big-screen TV but don't have the cash? Start setting aside the money rather than paying with your card without a plan.

If you're already stuck in debt, you can avoid paying some interest by paying more than the minimum amount. Remember that $3,000 at a 16.5% rate, in which you end up with more than $2,000 in interest charges because you paid the minimum? Well, if you paid $200 a month, those interest charges would drop to $383.

If you pay more than the minimum...

Another way to save money on interest is to transfer an existing balance to a balance transfer card or a low interest card.

With a lower interest rate, and even better, 0% intro APR, you can pay off that card debt at a faster rate. Also, you save hundreds of dollars in interest charges.

Comparing payoff with low interest vs. higher interest...

As you can see, even when you are paying the minimum, with the same card but the lowest and highest interest rate offered, the difference in the amount paid in interest is considerable, with the lowest rate paying more than $3,000 less in interest charges than the highest rate.

So, how do you get the lower interest rate? Card issuers look at a number of factors, including your credit score and your payment history, when deciding which rate to give you. Also, know that it's worth your while to simply ask for a rate decrease. A CreditCards.com poll found that of the 19% consumers who asked for a rate decrease, 13% were given what they asked for.

Why you should avoid keeping a balance on your credit card

Even with the best intentions, we can incur thousands of dollars on our credit cards within months. And often, it isn't because of an unexpected medical bill or car repair. Rather, everyday spending is the primary contributor to card debt, making up 32% of the reasons why cardholders have debt.

But it's not just the original expense that can impact your wallet – interest charges can actually run more than the original expense if you pay the minimum amount due each month.

And there's another reason why you should avoid keeping a balance on your card. The second most important factor of your credit score is your credit utilization ratio, or how much you owe on your cards compared to how much credit you have available. So, if you owe $500 and you have $5,000 in available credit, then your utilization ratio is 10%.

Figuring out your credit utilization ratio...

As you can see, there is a ratio for each card and a total ratio for all cards combined. Both matter. The industry standard is to keep the ratios under 30%, but it's best to keep them as close to 0% as possible, partly to avoid paying interest and partly to keep your credit healthy.

How do you avoid card debt?

Ideally, you stay away from card debt, partly because of your credit's health, but also because it's wasted dollars in the way of interest charges. But how do you avoid card debt? Here are 6 tips, with a sample budget:

• Create a dual budget. Make a budget for all expenses, then create a row just for credit cards. Include everything, so that you don't come up short the next month.
• Save. As you can see above, room has been made for savings. This isn't for a last-minute road trip – rather, this is for when your car breaks down or some other emergency occurs.
• Check back each month. Check your budget each month to make sure you are on target. Adjust to ensure your budget is realistic.
• Set a reminder. Create a reminder to pay the card bill before the due date. There's no point in having the money to pay the bill when you don't remember to pay it!
• Enter the 21st century. There are a number of apps out there that can help you manage your finances, including YNAB (You Need a Budget) and Mint. Each differs in its approach, but it's a fair bet there's one that suits your style. Some, such as YNAB, sync with your bank, and most, such as Mint, help you track and pay your bills.
• If you don't have the money for an item you want, set aside savings. Many financial institutions will allow you to create subaccounts that you can use for putting money aside.

Sample budget, with credit card expenses...

How do I pay off my credit card balance?

Maybe you've already incurred debt on your credit card. What to do?

Here, we look at the 6 steps you should take to dig out from under that balance:

1. Make a budget. First things first: Create a budget with room for saving and fun. That way, you don't have such an austere plan that you give up in frustration.
2. Calculate the interest. Based on your balance, figure out how much interest you will be paying.
3. Figure out how much you can pay each month. Now that you know how much interest you will be paying, figure out how many months it will take you to pay the balance off, with your trusty budget in hand.
4. Transfer the balance. Consider using a balance transfer card, which will allow you to pay 0% or low interest for a limited time.
5. Stop spending. Resist the urge to keep spending on your card; that will only get you deeper into trouble.
6. Keep the card. After you pay off the balance, hang on to your card, putting a small charge on it each month and paying in full by each due date. This helps with keeping your credit healthy by having a higher available credit.

How do you avoid paying interest on a credit card?

There are a couple of ways to avoid paying interest on a credit card:

• Pay in full each month. Interest is charged on a credit card when you carry a balance month to month. If you pay in full before the due date, then you avoid paying interest. While you are quoted an annual percentage rate (APR), the interest is calculated daily. So, if your card charges 15% APR, then you have a daily rate of 0.041096%.
• Take out a 0% intro APR offer. If you have an existing balance or you have a large charge coming up, another option is to take out a balance transfer card or a 0% card. These cards will have an introductory offer of 6-21 months, which means you may have up to 21 months to pay the balance without incurring more interest.

How do you calculate interest on a credit card?

While you are quoted an APR, or annual percentage rate, your interest is calculated at the end of each day. To find out how much will be accrued each day, divide the APR by 365 days. Then, multiple that amount by the amount owed, and add that with the amount owed. Here's how you calculate how much you are paying each day:

1. Divide 15% APR/365 days=0.041096%
2. Multiply 0.041096%*$1,000=$0.41
3. Add $0.41+$1,000=$1,000.41

As can be expected, the amount you owe each day goes up considerably the higher your balance. Take this example:

As you know now, most creditors assess interest or finance charges based on your average daily balance, and the interest is accrued daily, says credit expert Todd Ossenfort.

"Each day the balance of your account is multiplied by the daily periodic rate and the interest calculated is added to your balance," he says.

"As an example, a $13,000 balance at a daily periodic rate of .02805 percent would add $3.6465 in finance or interest charges to your balance.

"The next day of the billing cycle your balance would be $13003.65 and multiplied by the daily periodic rate would add interest charges of $3.6475, which begins to add up," Ossenfort says.

To calculate interest on a credit card, use our handy-dandy interest calculators, which allow you to figure out how long it will take you to pay off a balance with the minimum payment; how much you can save by speeding up the payment process; and more.

Our credit card calculators

Here, we offer 5 calculators to help you figure out which card is best for you, how long it will take you to pay off a balance and more.

• Minimum payment calculator. Use this calculator to figure out how long it would take you to pay off a card balance with the minimum required payment.
• Payoff calculator. This calculators allows you to manipulate the numbers to figure out how high your card payment needs to be to pay off in a set amount or time or how long it would take with a set payment amount.
• Cash back or low interest card. Here, you can assess whether a cashback card or a low interest card is best for you.
• Airline or low interest card. Similar to the previous calculator, you can figure out which type of card is best for your needs.
• Balance transfer calculator. This calculator allows you to figure out your payment based on multiple balances.

How do APRs work?

The annual percentage rate or APR is a financial term that is used by lenders to let you know how much interest you are being charged on a yearly basis for your loan, says Ossenfort. APR is fairly simple for the fixed-rate loan example, he says. It gets more complicated with outstanding credit card balances. That's because you may have several different APRs on one credit card account.

For example, you may have an APR for balance transfers of 1.9 percent, an APR for purchases of 12 percent and a much higher APR of around 25 percent for cash advances, he says.

"The key ingredient to getting the best possible APR for any loan is to have your credit in the best shape possible," Ossenfort says. That means paying in full and on time, every time, and regularly checking your credit reports and score.

Types of APRs

Here are the typical APRs charged by card issuers:

• APR for purchases. The most common APR, this rate is applied when you carry a balance. Some cards, such as the Chase Slate, offer a 0% intro offer for a set time, in the case of the Slate, for 15 months. Then, the balance is charged at the go-to rate, which is usually the standard rate for the card.
• APR for balance transfers. Similar to the purchase APR, balance transfer cards will usually offer a 0% intro APR for a set amount of time, then revert to the go-to rate.
• Cash advance APR. This rate usually kicks in immediately after you take out the cash.
• Penalty APR. Some cards, such as Discover products, don't have this type of APR, while others do. It can be considerably higher, as much as 29.99% (variable) in the case of the Amex Everyday, which reassesses your payment history every 6 months to decide if this rate continues.

How does your credit score affect your interest rates?

The higher your credit score, the better your interest rate can be, depending on the product. This goes for both credit cards and installment loans such as mortgages and car loans. Some cards offer a range -- your credit score, payment habits and balance can affect the interest rate your receive.

In the case of installment loans, Forbes compares two neighbors, each with a refinance of $300,000 with a 30-year fixed mortgage. The difference is one has a 750 credit score, while the other has a score of 620.

Because of the score differences, the neighbor with the 750 score gets a 4.25% rate, paying $1,476 a month, while his neighbor gets a 4.75% interest rate, paying $1,565 a month.

Forbes points out that by paying 2 points or $6,000, the neighbor with the lower score can get the lower rate, a rate that the neighbor with a 750 score received at no extra cost, all because of having a great score.

In the same way, your higher credit score can get you a better APR on your card, typically from within a range. But how do you get a better credit score?

How to get a better credit score

• Pay on time. This is your most important part of your FICO credit score. Always pay on time.
• Pay in full. A part of the second most important aspect of your score, this is a habit that speeds up your chances of getting a better score.
• Don't take out new credit. Resist the urge to take out new loans or cards until your score is where you want it to be.
• Be patient. Part of your score is based on length of credit history. That's why it's important to keep on plugging with your good credit habits.
• Ask. Once your score has improved, simply ask your card issuer for a better score. Our poll shows that when consumers ask for better rates, they have a shot for getting what they ask for.

How to compare two low interest credit cards

Low interest credit cards are about more than just the APR. You'll want to also factor in the different types of APRs, the annual fee and more.

Compare low interest cards...

As you can see, the cards' lowest rates and annual fees are comparable, while the cash advance rate is lower for the VentureOne. If you plan to pay off your balance, the rewards for either card can also be worth your while.

Who are low interest credit cards good for?

Whether you are carrying a balance or planning to get rid of one, a low interest credit card can be a good choice. Here are the people who might benefit from a low interest credit card.

• Good credit. Typically, the better your credit, the better your interest rate on a credit card, although there are other factors a card issuer also looks at.
• Carry a balance. Although carrying a balance on a credit card isn't ideal, if you must, a low interest card may be the best choice.
• Great habits. If you are in the habit of paying on time each month more than the minimum, that will speed up your ability to pay off the balance.
• Workable plan. Yes, you have a balance, but that doesn't mean you will always have one. Figure out how much you can afford to pay each month, stop incurring new debt, and keep your sights on the end goal.

Want some more information?

You can read some individual reviews for low interest credit cards at our reviews section. You can get a better ideas of how products compare to one another so you can definitively decide on the best offer for your needs. Link to rate report to compare to our current national averages.

CreditCards.com's best low APR credit cards

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