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Credit card interest rates are at an all-time low, thanks to the Federal Reserve dropping rates in recent years. While on the whole, interest rates are currently favorable for consumers, it doesn’t mean there isn’t room to comparatively shop for the best available offers. Below you'll find our list of favorite low-interest credit cards, which fit a variety of purposes.
- Best 0% APR Credit Cards: for consumers who need extra time in paying down a big purchase: 15-18 months of 0% purchase APR
- Best Low-Interest Credit Cards: the cards listed here offer the best long-term solutions for low interest
- Compare the best low-interest credit cards: use our tool to find the best low-interest credit card for your spending habits and preferences
- Overview of credit card interest rates: We explain APR, as well as help debunk common myths about how credit card interest works
Best 0% APR Credit Cards
These credit cards allow users to take advantage of 0% introductory APR periods. For a set amount of time, usually between 15 and 18 months, any purchases made on this type of credit card will not charge the user any interest. This is especially useful to individuals who need to make a big purchase but need some time to fully pay off.
Citi Simplicity® Card
Best for consumers who won't be able to pay off a purchase for a long time. The Citi Simplicity® Card offers a long 0% Intro APR period (for purchases) – 12 months. Once your introductory period runs out, the card’s APR will be between 16.24% - 26.24%* (Variable). If your credit worthiness is good enough to qualify for the lower rate you're still getting a competitive APR. However, if your APR is on the higher end of the range, you can do better with other cards.
On top of having a fantastic promotional 0% APR period on purchases, the Citi Simplicity® Card also doesn't charge users late fees on payments. This is good for anyone who forgets to make a payment once or twice, but we urge consumers to remember the hidden cost. Missing a payment due date on a credit card bill will have a very bad impact on your credit score. Once the promotional period ends, as noted, your APR will depend on your credit worthiness. Therefore, if you want to maintain competitive interest rates on your purchases, we recommend you shy away from using this feature.
Best for individuals who need help paying down credit card debt. Chase offers Blueprint® plans for free to Slate® cardholders. This service allows users to create personalized plans to project how long it will take to pay down a balance. Blueprint® also helps to avoid paying interest by selecting purchase categories to pay off in full, as well as keep track of your spending habits. If you find yourself paying credit card interest, but want to avoid doing so in the future, the Chase Slate® and the tools it provides will help in training and building a better payment history.
The Chase Slate® has a 15 month 0% intro APR period on balance transfers and purchases. This gives you the extra breathing room to get used to any changes in your finances, and using the payment plans set out by Blueprint®. Be careful though. If you don’t change your ways, the interest rates you’ll end up paying with this card are less than favorable.
Best Low APR Credit Cards
If you find yourself, from time to time, unable to pay off a credit card balance in full, you may be interested in a credit card that assesses low interest in the long-term, not just during a promotional period. The cards below are some our favorite overall low interest APR credit cards.
Barclaycard Ring® Mastercard®
Best for anyone who simply wants a low interest card. The Barclaycard Ring® Mastercard® charges users a 14.24% Variable ongoing purchase APR. We consider this to be among the most competitive APRs. On top of this, the Barclaycard Ring® Mastercard® has no annual fee and no foreign transaction fees. Currently, the Barclaycard Ring® Mastercard® has a 0% intro APR for 15 months on balance transfers made within 45 days of account opening. After that, a 14.24% Variable APR will apply. Balance transfers that post to the account within 45 days of account opening will be assessed a fee of $5 or 2% of the amount being transfered, whichever is greater. However, there are no fees for balance transfers that post to the account after 45 days of account opening.
Discover it® Cash Back
Best for those looking for a mix of low APR and spending rewards. If you are generally good about paying your credit card bill in full, but from time to time need to carry a balance, we recommend going with the Discover it® Cash Back credit card. The card comes with a 14.24% - 25.24% Variable APR that is based on your creditworthiness.
The Discover it® Cash Back is a cash back credit card that earns users 5% cash back in categories that change each quarter like gas, restaurants, wholesale clubs and more -up to the quarterly maximum each time you activate. For 2019, the categories include grocery stores (January-March), gas stations, Uber & Lyft (April-June), restaurants (July-September), Amazon.com (October-December). Outside of this, it earns 1% cash back on all other purchases. Bonus categories vary each quarter, so you should keep an eye on their calendar if you want to be spending optimally.
PenFed Premium Travel Rewards American Express Card
Best for members of the Pentagon Federal Credit Union (i.e. veterans, active military members, Pentagon building employees, etc.). Consumers who are members of this credit union can qualify for one of the best low interest credit cards around – the PenFed Premium Travel Rewards Amex card. Even if you're not directly affiliated with the Pentagon, consumers can still sign up through a few general organizations to be eligible. Following a 12 month 2.99% intro APR period, your APR will fall anywhere between 9.99% and 17.99%. If you’re on the lower end of the spectrum, this card offers one of the best interest fees around, even beating out the Discover it® Cash Back card!
The PenFed Premium Travel Rewards American Express card has additional value for travelers, giving 5 rewards points on every $1 spent on airfare purchases. These points are worth approximately $0.01, resulting in a 5% rewards rate (1% on all other purchases). Additionally, you can qualify for a signup bonus after spending $2,500 within the first 3 months of opening your account – if you meet this requirement you earn 20,000 bonus points. Plus, as another perk for travelers, this card is both EMV-ready and comes with no foreign exchange fees, making it ideal for use abroad.
Navy Federal nRewards Secured Credit Card
Best for Navy Federal Credit Union members with bad credit. The nRewards Secured Credit Card offers APR as low as 8.99%.If your FICO score is below 550, it may be difficult getting approved for a low interest rate. If you look to all credit card disclosures, you'll see that APR is always based upon your credit score. The nRewards Secured card is designed with that in mind, helping individuals with poor credit history get reasonable interest rates. On top of that, you can get a 1% rewards rate by using the card for everyday purchases. These rewards points earned with the card can be exchanged for a variety of gift cards.
The only major downside to the NRewards Secured credit card is its high minimum deposit. You must have at least $500 in your Navy Federal Savings account in order to apply for the card. This is fairly high as far as secured cards are concerned, but it's the price you must pay for the lowest APR in town.
Compare Low-Interest Credit Cards
If you are interested in seeing how your different credit cards compare based on your specific budget, you can use the tool below to find out. Input your current credit card obligations, the APR, and the type of minimum payments you can afford to make, and the tool will calculate for you how much you can save by moving the balance over to anyone of these credit cards.
An Overview of Credit Card Interest Rates & APR
If you spend a little bit of time thinking about APR, you will come to a realization: it’s not very straightforward! In this section we will demystify some of the more confusing concepts so that users are better equipped to look at and examine credit card interest objectively for themselves.
How does APR differ from the monthly interest rate?
The first thing to note about APR is that it does not communicate what your actual interest rate is - at least not in an easy to understand fashion. To extract the monthly interest rate from your APR, you must follow a simple formula:
Monthly Interest Rate = APR x Number of Days in Billing Period / 365
The number of days in your billing period will vary from bank to bank, but it is usually around 30 days. Taking this interest rate one step further and actually calculating the amount of interest you must pay is a bit more complicated. For the sake of simplicity, we will work with the "average daily balance" method of calculating interest - which is used by most major financial institutions. As the name suggests, the average daily balance is the mean credit card debt you had for the duration of your billing period. Once you have this value, interest can be calculated using the following:
Total Interest = Average Daily Balance x Monthly Interest Rate
As noted, the way in which your bank calculates interest will differ from institution to institution. These can include the previous balance method, adjusted balance method, or more. You can view the type of calculation your bank performs by reading the terms & conditions.
Why are Credit Card Balances Based on the Prime Rate?
You may have noticed that credit card interest rates are variable, and based on the “Prime Rate”. Without fail, each credit card agreement says something along the lines of “This APR will vary with the market based on the Prime Rate”. What does this mean? The prime rate is the interest rate which banks use when handing out loans to consumers with the highest credit rating. This “prime rate” is a driven by the market, and it fluctuates depending on the state of the economy.
The most likely reason behind why a bank would want to base their APR on the prime rate is to allow themselves to respond to the changing market quickly. The Truth in Lending Act forbids banks from raising a consumer’s credit card interest rate without proper notice and cause. The only exception to this rule exists if the interest rate is driven by something that is not controlled by the bank – such as the prime rate, which, as noted, is an average market value. If banks want to be able to vary credit card interest rates more easily, with the changing health of the economy, they must base their APR on such a market indicator.
If you see that your credit card APR varies between 12.99% and 20.99%, for example, a part of that value is the prime rate (as of publication, current levels are 3.25%). If the prime rate were to suddenly increase, so would your APR. If, on the other hand, the prime rate decreases, your APR decreases with it (with the boundaries being 12.99% and 20.99% in our example).
Common APR Myths
Myth: You need to pay interest in order to improve your credit score.
Fact: Your credit score does not go up faster, or slower based on whether you pay interest on your credit card. If anything, you are better off not carrying a balance and thus NOT paying interest. Using more than 60% of your credit limit is bad for your credit score. If you carry balances over, and continue to pay interest, credit reporting agencies are likely to deem you less credit worthy.
Myth: I will never pay a higher interest rate than the maximum credit card APR.
Fact: Most banks will charge users a Penalty APR fee, which kicks in when you miss a credit card bill. The penalty APR is usually around 29.99%. Note that this is the maximum allowable APR, as set by law. If your credit card issuer is charging you more than this, report them to the Consumer Finance Protection Board (CFPB). Below you can find the typical Penalty APR rate by card issuer.
|Penalty Interest Rate (%)|
Myth: Once something causes your credit card APR to go up, it’s hard to get it back down.
Fact: If your credit score slips, and your interest goes up as a result you will have the opportunity to have your APR lowered, if your credit score or circumstances recover. Once you believe your situation has changed, contact the bank and let them know. They are, by law, required to investigate the circumstances which caused them to raise your APR in the first place. If they find sufficient evidence of your credit worthiness improving, they are required to lower your interest.