What is a Low-interest Credit Card?
A low-interest credit card is a credit card option that offers an interest rate lower than a traditional credit card. Such a card's interest rate is often variable, but there are also options with a fixed rate.
A credit card is considered low-interest if the APR of the card starts at 12%-14%. The percentage of variable APR depends on the value of the prime rate. Quite often, such credit cards have a 0% intro APR period during which APR is not charged for purchases and balance transfers.
How Low-interest Works on Credit Cards?
A credit card allows the cardholder to have a line of credit with a certain balance. The borrower can make purchases using this money, that is, without spending his own. The card issuer charges a fee for using this credit balance, which is what interest is.
Low-interest credit cards allow borrowers with a good or excellent credit history to have an interest rate lower than traditional credit cards. Moreover, most of these cards have an initial period of up to 15 months in which the APR is 0%. After the end of this period, APR is accrued every day for the amount that was not paid on time. The daily APR is calculated as the annual APR divided by 365. At the same time, if the cardholder pays the entire debt before the start of a new billing cycle, then they should not pay interest.
For example, if a credit card has an APR of 20%, then the daily rate will be 0.055%. If the cardholder has an unpaid debt of $1,000 on the first day, then the debt will increase by $0.55 the next day. By the month's end, the debt amount will be $1016.5. The amount of interest, in this case, is $16.5.
Thus, the accrual of APR may accumulate a large amount of debt to which late fees and penalty APR may also be added.
Pros and Cons
Pros
- The interest rate is lower relative to other credit cards. The most significant benefit of low-interest credit cards is their lower APR than other cards. Borrowers with excellent credit scores can have an APR in the region of 12%-14%. With such an interest rate, the cardholder, even if there is a debt, after the completion of the billing cycle, will have to pay a not-so-large amount of interest. Such a card is great for making large purchases, as low-interest credit cards have an APR lower than any consumer loan.
- Availability of 0% Intro APR period. Many low-interest credit cards offer holders an introductory period of 12-15 months, during which the APR for purchases and balance transfers is 0%. Also, the foreign transaction fee during this period is usually lowered by a couple of percentage points. During the intro period, it is enough for the borrower to make on-time minimum payments to save 0% APR.
- There is an opportunity to save on an existing loan. If the cardholder already has a credit card debt, then by opening a low-interest credit card, they can make balance transfers. Credit card balance transfers allow the borrower to do debt consolidation and thereby reduce the APR and repay the loan faster.
- The cardholder can receive cash rewards. Many of the low-interest credit cards are also cash rewards credit cards. Such cards allow holders to earn bonus cash from any purchases. Moreover, some cards offer increased cash back on some bonus categories, such as purchases at grocery stores, gas stations, and other combined purchases. Cash rewards credit card allows you to redeem rewards as a statement credit, gift cards, or cash back.
Cons
- High credit requirements. Low APR credit cards are only available to borrowers with good or excellent credit. Most often, credit card issuers require a credit score of at least 700. Credit card companies have more confidence in such borrowers and therefore issue such favorable loan offers only to borrowers with a high credit score.
- The cards offer a few perks. Low-interest credit cards offer fewer special discount offers and perks for cardholders than other credit options. For example, some such cards may offer cell phone protection with the condition that the borrower pays a monthly cell phone bill from this card. However, perks like this are not suitable for all cardholders. Travel rewards credit cards offer various travel perks, such as discounts on hotels or extra luggage on the plane. Such offers may be of interest to more borrowers.
- Other types of credit cards offer more favorable sign-up bonuses and less difficult conditions for obtaining them. Such cards do not offer the most profitable sign-up bonuses. Most often, the sign-up bonus is increased cash back for certain categories or functions, such as an unlimited cash back match, which is needed only by borrowers who are chasing cash back. Moreover, to receive a sign-up bonus, the cardholder must fulfill a certain condition that is not always easy to fulfill.
The Best Low-interest Credit Cards
Discover it® Cash Back Credit Card
The Discover it® Cash Back Credit Card is a suitable option for cardholders who are looking for a cash back rewards program that offers a good return and no annual fee.
The Discover It Cash Back is a credit card that offers the following benefits:
- Cash back rewards. Cardholders can earn 5% cash back in rotating categories (up to the quarterly maximum) and 1% cash back on all other purchases.
- Matching cash back. At the end of the year, Discover will match all the cash back earned.
- Freeze it. Cardholders can freeze their account credit with a click in the mobile app to prevent new purchases, cash advances, and balance transfers.
- Mobile app. Cardholders can access their account information and manage their finances through the Discover mobile app.
Rates and fees for the Discover It Cash Back include:
- The card has a variable purchase APR of 14.24% - 25.24% depending on creditworthiness.
- The card has no annual fee and no foreign transaction fee.
- The late payment fee is up to $40.
- The balance transfer fee is 3% of the transfer amount, with a minimum of $5.
Wells Fargo Reflect® Card
The Wells Fargo Reflect® Card is a good option for cardholders who are looking for a cash back rewards program and a 0% introductory APR on purchases and balance transfers.
The Wells Fargo Reflect Card is a credit card that offers the following benefits:
- Cash back rewards. Cardholders can earn unlimited cash back rewards on every purchase. The rewards rate may vary based on the cardholder's creditworthiness and other factors.
- 0% Intro APR. The card offers a 0% introductory APR on purchases and balance transfers for 18 months, after which a variable APR applies.
- Mobile App. Cardholders can access their account information and manage their finances through the Wells Fargo mobile app.
Rates and fees for the Wells Fargo Reflect Card include:
- The card has a variable purchase APR of 14.24% - 27.24% after the introductory period, depending on creditworthiness.
- The card has no annual fee.
- The late payment fee is up to $40.
- The balance transfer fee is either $5 or 3% of the transfer amount, whichever is greater.
Citi Diamond Preferred Card
The Citi Diamond Preferred Card is a good option for cardholders who are looking for a 0% introductory APR on balance transfers and a card with no annual fee and no penalty APR.
The Citi Diamond Preferred Card is a credit card that offers the following benefits:
- 0% Intro APR. The card offers a 0% introductory APR on balance transfers for 21 months from account opening, after which a variable APR applies.
- Citi private pass. Cardholders can access exclusive experiences and ticket presales through the Citi Private Pass program.
Rates and fees for the Citi Diamond Preferred Card include:
- The card has a variable purchase APR of 14.74% - 24.74% after the introductory period, depending on creditworthiness. There is no penalty APR for late payments, which can help to minimize the impact of a missed payment.
- The card has no annual fee.
- The balance transfer fee is either $5 or 3% of the transfer amount, whichever is greater.
- The late payment fee is up to $40.
Capital One Quicksilver Cash Rewards Credit Card
The Capital One Quicksilver Cash Rewards Credit Card is a good option for cardholders who are looking for a simple and straightforward cash back rewards program with no annual fee.
The credit card is a cash back rewards credit card that offers the following benefits:
Unlimited cash back. Cardholders can earn unlimited 1.5% cash back on every purchase made with the card, with no limits or rotating categories.
Sign-up bonus. New cardholders can earn a one-time $150 cash bonus after spending $500 on purchases within the first 3 months of account opening.
0% Intro APR. The card offers a 0% introductory APR on purchases for 9 months from account opening, after which a variable APR applies.
The rates and fees for the Capital One Quicksilver Cash Rewards Credit Card include:
The card has a variable purchase APR of 14.74% - 24.74% after the introductory period, depending on creditworthiness.
The card has no annual fee.
The balance transfer fee is either $0 or 3% of the transfer amount, whichever is greater.
The late payment fee is up to $39.
No foreign transaction fees. Cardholders can use the card for purchases abroad without incurring any foreign transaction fees.
Chase Freedom Flex℠ Credit Card
Chase Freedom Flex℠ Credit Card is a cash back rewards credit card that offers several benefits, fees, and rewards to its cardholders. Some of the key benefits of the card include:
Cash back rewards. Cardholders earn 5% cash back on up to $1,500 in combined purchases in bonus categories rotating each quarter. Cardholders also earn unlimited 1% cash back on all other purchases. Cardholders can transfer their rewards to other Chase Ultimate Rewards cards for even greater rewards.
Sign-up bonus. Cardholders can earn a $200 bonus after spending $500 on purchases within 3 months from account opening.
0% Intro APR. The card offers an introductory 0% APR on purchases for 15 months from account opening.
Travel and purchase protections. The card offers travel and purchase protections, including travel accident insurance, trip cancellation/interruption insurance, extended warranty protection, and more.
The rates and fees for the Chase Freedom Flex Credit Card include:
The card has no annual fee.
A foreign transaction fee of 3% applies to each transaction made outside the United States.
A late payment fee of up to $40 may be charged for payments made after the due date.
Blue Cash Everyday Card from American Express
The Blue Cash Everyday Card from American Express is a cashback rewards credit card with no annual fee.
The credit card offers the following benefits:
Cash back. Earn 3% cash back on up to $6,000 in purchases at U.S. supermarkets each year, then 1% back. Earn 2% cash back at U.S. gas stations and select U.S. department stores. Earn 1% cash back on other purchases. There are no rotating categories or sign-ups needed to earn rewards.
0% Intro APR. 0% introductory APR on purchases and balance transfers for 15 months, then a variable rate of 14.24% to 25.24%.
The rates and fees for the Chase Freedom Flex Credit Card include:
There is no annual fee.
The credit card Interest rates are variable rates of 14.24% to 25.24%.
The balance transfer fee is either $5 or 3% of the amount of each transfer, whichever is greater.
The cash advance fee is either $10 or 5% of the amount of each cash advance, whichever is greater.
Petal 2 "Cash Back, No Fees" Visa Credit Card
The Petal 2 "Cash Back, No Fees" Visa Credit Card is a credit card aimed at people with limited or no credit history. It offers the following benefits, rates, fees, and rewards:
Cash back. 1% cash back on eligible online retail purchases, automatically credited to your account each month. 1.5% to 2% cash back on select categories, subject to change.
FICO monitoring. Access to your FICO credit score for free in the app.
Virtual card numbers for added security.
The rates and fees for the Chase Freedom Flex Credit Card include:
The APR for purchases and balance transfers is variable from 15.24% to 26.24%.
There is no annual fee, no foreign transaction fee, no late fee on the first late payment, and no minimum deposit required to open the card.
How to Choose a Low-interest Card?
When choosing a suitable credit card and a suitable credit card company, a potential borrower needs to consider several important factors before account opening.
- Pay attention to the starting APR. Since such cards have a variable APR, the borrower should consider the starting APR to compare loan offers. Best low-interest credit cards have an initial APR of around 12%. A borrower with a high credit score can expect an APR of 15-17% in this case. Since the low-interest rate is the main advantage of such cards, this factor is the most important.
- Consider low-interest credit cards that do not offer a 0% intro APR period. The borrower should look for the card with the longest such period to get the maximum benefit from using this credit card. The intro period must have 0% APR for both purchases and balance transfers.
- Assess all possible fees that the card may require. If the cardholder plans to use it abroad, then they should pay attention to foreign transaction fees. The foreign transaction fee is usually about 5%, but during the intro APR period, it can be 3% or less. A balance transfer fee is important to consider for a borrower who wants to make debt consolidation. The borrower is also advised to look for a credit card with a $0 annual fee. However, some cards that require an annual fee can also be considered as, in return, they usually offer a lot of bonuses and perks.
- Conider bonuses, cash back, and perks. Different loan offers have different sign-up bonuses and additional perks. The borrower should choose which perks are more suitable for them, depending on their needs.
To compare loan offers, the borrower is recommended to turn to open Internet sources that have articles with comparative tables. Such tables take into account all of the above key factors of different proposals.
Comparison of landers is best made by obtaining a set of pre-qualification. Upon receiving pre-qualification from the lender, the borrower can study the loan agreement, which specifies APR and fees based on the borrower's credit score.
How to Apply for a Low-interest Card?
Recommendations for eligibility
For account opening, the borrower must be 18 years old and be a citizen or permanent resident of the United States. To confirm the identity of the borrower, the lender may ask them to upload a driver's license, passport, or state-issued ID.
Low-interest credit card issuers have high credit requirements for potential borrowers.
The minimum credit score that a lender may require is 650. However, most lenders require a 700 credit score. It is important for the lender that the borrower has healthy spending habits and can repay the loan on time.
Also, the borrower must not have been bankrupt for the last 7 years and more than 30 days of late payments on previous loans.
A potential cardholder needs to have a debt-to-income ratio below 45% and have a stable source of income that brings them income for at least 2 years. To confirm the borrower's income, landers are usually asked to provide pay stubs, bank statements, W-2s, or tax returns.
The Application Process for Account Opening
To apply for an account opening, the borrower needs to go to the lender's website and click on the "Get Started" and "Apply Now" buttons.
- The future cardholder needs to enter personal information such as name, phone number, SSN, email, residential address, and zip code.
- You need to enter information about whether you own real estate or rent housing and how much they pay for it per month.
- On the next page of the application form, the borrower needs to enter information about the employment status, the name of the employer, and the position that the borrower holds.
- After that, you need to fill out the amount of annual income before taxes.
The application can be completed in 10-15 minutes. Credit approval comes in a couple of hours.
How to Reduce Credit Card Interest?
It is possible to use a credit card without paying interest at all.
During the intro APR period, which is offered by most of these cards, interest is not accumulated on the borrower's balance sheet since, during this period, the APR is 0%.
After the end of this period, interest begins to accrue on the balance that remains after the end of the billing cycle. To avoid paying interest, the borrower needs to pay the loan debt monthly.
For this to be possible, the cardholder is recommended to use only a small part of their line of credit, which they can pay at the end of the month.
