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Credit card issuers are legally required to list the interest rates on their offers so consumers can vet this information before they apply. These terms may be stated clearly on the advertisement pages for credit cards you find online, but you can also find them listed on your card statement, buried in credit card’s terms and conditions pages or the cardholder agreement page.
Most credit card interest rates are determined using the prime rate, which is based on the Federal Reserve’s federal funds rate. For example, your credit card issuer may decide your interest rate is 14% plus the prime rate. If the prime rate was 5% at the time, your credit card’s interest rate would be 19%. This is why credit card interest rates rise and fall when the Fed raises or lowers the prime rate, which makes it hard to predict what your rate may be several months or years from now.
Also note that many credit card issuers assign different interest rates to different consumers based on their credit rating and other factors. That’s why you may seem some credit cards advertise a range of APR's before you apply, such as “17.99% to 25.99% depending on your creditworthiness.”
Most U.S. credit cards today come with variable interest rates, meaning their interest rates can and do go up and down over time when the Federal Reserve raises or lowers the prime rate. A variable interest rate can be acceptable in a low-interest rate environment, but variable rates can make the monthly payment on your credit card — and the total cost of servicing your debt — unpredictable.
According to the most recent data from the Federal Reserve, the average interest rate on new credit card offers, store cards and existing cards that accrue interest can be found on the CompareCards statistics page.
One interesting fact about credit cards is that, although you can qualify for a lower interest rate if you have good credit, many cards aimed at consumers with excellent credit still charge high APRs. This is especially true among rewards and travel credit cards that come with a lot of perks. For example, the popular Chase Sapphire Reserve® comes with an APR between 18.49% - 25.49% Variable.
Considering the average credit card APR is currently 16.91% for new credit card offers, any rate below that may be considered "low" or a good rate. Keep in mind, however, that some credit cards come with much lower variable rates for those who qualify.
If your goal is saving as much as you can on interest interest payments, you may also want to consider cards that offer 0% APR on purchases for a limited time. If you’re able to pay off your debt during that time, you can avoid interest charges on your purchases altogether.
Some introductory 0% APR credit cards also extend the benefit to balances transferred from other credit cards, paving the way for you to consolidate your debts, save on interest and pay down debts faster. Balance transfer credit cards can assess a balance transfer fee between 3-5% of the amount transferred, but know there are some balance transfer cards that don’t charge that fee.
While a low interest credit card can help you save money on interest over time, there is one tried-and-true method that can help you avoid paying any interest on your credit card bills. Because credit card interest is applied to balances left over after your billing statement closes and your payment due date has passed, you can avoid interest by paying your credit card balance in full every month.
Some additional tips that can help you avoid credit card interest and long-term debt include:
While credit card interest rates are advertised as APRs, or annual percentage rates, credit card interest is actually calculated on a daily basis. To figure out how your interest rate applies to your credit card balance, there are a few steps to take.
When it comes to low interest credit cards, it’s hard to beat the value offered by 0% APR offers. There are two types of cards that fall into this category you should be aware of:
Also note that some introductory 0% APR credit cards waive interest charges on both purchases and balance transfers for a limited length of time. Make sure to compare intro 0% APR credit cards in terms of the length of their offers, the variable APR you’ll be charged thereafter, rewards schemes and other factors before you sign up.
Having a solid credit score gives you the potential to qualify for the lowest interest rates credit cards offer. A high score can also improve your chances at qualifying for a credit card in the first place — particularly when it comes to travel credit cards or other premiums cards geared to consumers with good credit.
Generally speaking, credit cards with the best rates and terms tend to go to those with FICO scores that are “very good” or “exceptional,” or any score over 740. A “good” score, or any FICO score between 670 and 739, makes you an acceptable borrower, meaning you may or may not get the best interest rates available.
A “fair” score, or a score between 580 and 669, typically means you’ll pay a higher interest rate when compared with peers with better credit.
It’s also important to know that any score of 579 or below means you have poor credit and a poor chance at getting approved for an unsecured credit card.
It’s important to note that even though you may have an excellent credit score, you’re not guaranteed to be approved for a card’s lowest APR. The issuer takes into account a variety of factors besides your credit score in determining what your APR will be.
The short answer to this question is “yes.” In fact, a recent study from CompareCards.com revealed that 8 in 10 consumers who asked for a lower interest rate on their credit card were successful in the past year.
Unfortunately, not enough people take the time to negotiate a more affordable rate. CompareCards.com figures show that only 1 in 5 cardholders bothered asking their card issuer.
If you prefer to keep the credit card you have, but wish that your interest rate was lower, you have nothing to lose by picking up the phone to ask. Call your credit card issuer and make your case for a lower interest rate, and you may find they are happy to oblige.
There is an array of low interest credit cards to choose from, but you should take the time to compare offers before you decide. Some come with intro 0% APR offers that can help you save on interest charges initially, but others come with lower ongoing rates. You’ll also want to consider cardholder benefits, any sign-up bonuses and rewards programs to see how they stack up. Here are some factors to consider as you pick a low interest credit card.
Low interest rate (or 0%) credit cards can save you hundreds of dollars on balance transfers and on routine purchases carried over as credit card balances. Or you may simply want to be rewarded with a preferential interest rate as acknowledgement for good credit history and responsible debt management. Whatever your goals or motivation, zero percent or low interest credit cards can help you maintain the lowest rates available to individuals with excellent to good credit. You can find out more about credit score here.
Keep in mind that there are two main categories of low rate credit cards, namely those that offer a Variable APR and those that give you a Fixed APR. Just like with variable versus fixed rate mortgages, a fixed rate APR will remain relatively stable through the course of the loan. If your card company decides to raise it – which is somewhat rare – they will first notify you of that change according to Federal law requirements. With a variable rate, your APR is tied to a prevailing rate such as the Prime Interest Rate. If the prime rate increases then your APR will most likely follow in a similar fashion.
Generally speaking, credit card companies and banks will extend either 6 or 21 month offers – within the 0% to 3.99% annual interest rate range. That can generate a considerable discount when normal APRs are averaging around 15% or higher. Once the introductory promotional period expires, the APR on a low interest credit card or interest free credit card may revert to the regular interest rate. Of course the ideal balance is a credit card that offers a great near term rate followed by an attractive, competitively priced low interest rate for the long term.
The interest rate charged on your credit card is widely regarded as the single most important component of your card. That’s because it determines the major cost for you to borrow or roll over balances and pay them off over time instead of all at once or within the same month that you make purchases. That’s why getting a zero percent or low interest credit card can be huge financial boon, no matter what your credit card usage patterns or money management strategies may be.
Looking to transfer your balance? Transfer your high interest debt to Citi Simplicity® Card - No Late Fees Ever with an intro APR of 0% for 21 months on Balance Transfers. Plus, you will get generous intro APR 0% for 12 months on Purchases.