If you can’t pay off your balance every month, you may be better off choosing a low-interest credit card. A low-interest credit card saves you money by reducing the cost of debt: When you're paying less in interest, you can pay back what you've borrowed more quickly. Some low interest credit cards come with a 0% introductory rate while others have a low, ongoing rate. However, remember that these cards generally require a good to excellent credit rating for approval.
Usually when credit cards offer a low or 0% interest rate this only lasts for a set promotional period. After that, the interest rate will go up to a standard rate. With low interest credit cards, the rate is usually set for the lifetime of the card.
The rate is set for the lifetime of the card, making budgeting more straightforward
You don’t have to keep switching cards to take advantage of various 0% deals, and can avoid paying balance transfer fees
Low interest cards tend to carry a significantly lower annual fee than regular cards – sometimes there’s no annual fee at all
If you usually pay off your bill in full every month, but think you might occasionally make a big purchase and need to carry over a balance, the level of interest you'll be charged will be relatively low
A low interest credit card might be right for you if:
You have good or excellent credit scores
You often carry a balance on your credit card
You're looking to transfer a balance from a higher interest credit card
A low interest credit card might NOT be a fit for you if:
You have lower credit scores (you may not get approved)
You don't carry a balance and you want to earn rewards.
The current average variable interest rate on all credit cards (as of 9/12/18) is 17.32%.
A low interest card shaves several points off that rate and possibly even offers a 0% APR for a limited duration. For example, the Barclaycard Ring® Mastercard®, comes with a variable APR of 13.74%.
You should always compare interest rates on the cards you're considering, but be sure to also factor in other features, such as if there is an annual fee on the card. You might sacrifice a slightly lower interest rate for a card that doesn't charge an annual fee. (But do the math—if you're planning to carry a big balance, even a small difference in interest rate could outweigh what you'd pay in terms of the annual fee.)
If you're going for a balance transfer card, be sure to calculate the cost of the transfer fee when making your decision. And make sure you are clear on any introductory periods and how the rates will change after that intro period ends.
Although a card with a low ongoing rate can save you a lot of money over time, you're still paying interest. Apply those savings toward whittling down your debt faster. Saving, say, $20 a month on interest means you have $20 more you can use to reduce the balance on your credit card and move that much closer to freedom.
With any card, watch your balance. For the sake of your credit scores, it's best to keep your balance under 30% of the credit limit on the card. Under 10% is even better. When balances rise above 30% of credit limits, scoring formulas start to interpret that as a sign of financial stress.
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