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Interest rates are rising, which is good news for savers, but less so for those with a balance on a credit card. To save money, it may be worth looking for a new credit card with a lower interest rate.
Here’s what you need to know about the best credit card interest rates right now.
Why do credit cards have different interest rates?
The interest rate you are charged on your credit card is variable, meaning it changes when interest rates generally rise. Interest rates are not all the same — they can vary from card issuer to card issuer and also from customer to customer.
When you use your credit card to pay for a purchase, the credit card issuer is actually lending you the money to make that purchase. If you pay for the purchase before the due date indicated on your credit card invoice, you will not pay any interest, assuming that you do not already have a balance on your credit card. But if you don’t pay everything you owe by the time the bill is due, you’ll pay interest on the balance. Interest is added to your credit card balance, so after the first month you also pay interest on the interest.
Here’s how it works. Interest on credit cards is expressed as an annual percentage rate, or APR. Since you receive an invoice every month, you will be invoiced 1/12e of this annual rate each month. So if you owe $1,000 on your credit card and your interest rate is 24.00% APR, you will be charged $20 in interest, or 1/12e annual interest of $240. Your balance is now $1,020 and next month’s interest will be applied to this amount, resulting in an interest charge of $20.40.
When you apply for a credit card, the card issuer will determine your interest rate based on your creditworthiness. If you have a high credit score, pay all your bills on time, and don’t have a lot of outstanding balances, you can get the best interest rate available. If you’ve missed a few payments and your credit score is lower, your rate may be higher. If you read the fine print, you will usually see the range of credit scores – for example, 17.49% – 29.99% APR. The rate is usually variable, so when overall interest rates go up, you may also see your credit card interest rate go up.
Here are the best low interest credit cards and who they are best for.
First Tech Choice Rewards World Mastercard
This card has the lowest APR, and even the high end of the APR is not much higher than the best APR on some other cards. It also has all the other features that most cardholders are looking for.
- 0% APR for 12 billing cycles.
- 10.50% – 18.00% APR after introductory period.
- Earn 20,000 bonus rewards points when you spend $3,000 in the first 60 days you have the card.
- Earn 2 reward points for every dollar spent on everyday purchases like groceries, gas, medical care and more, and 1 point for every dollar spent on everything else.
- No annual fee.
Ideal for 0% Intro APR
Some credit card issuers offer a special introductory rate to entice you to apply for their card. This rate can be as low as 0% APR and can apply for the first year or so that you have the card. After that, they start charging their regular rate. Here are the best credit card interest rates with an introductory rate of 0%:
Capital One Quicksilver Card
Great for cashback
Cash back on credit card purchases has become commonplace, but not all cash back cards are the same. There are lots of variations in the amount of cash back you can get, the types of purchases that qualify, and if there are any limits. Then there is the interest rate to consider.
Here are the best low interest cash back credit cards.
Discover it Cash Back Card
Ideal for building or repairing credit
If you have bad credit or no credit at all, it can be difficult to get a credit card, regardless of the interest rate.
Here are two low-rate options for those who need to build — or rebuild — their credit.
Free Petal 2 Cash Back Card
OpenSky Secure Visa Card
- With OpenSky, you will need to put down a deposit equal to the line of credit.
- Variable APR of 18.99%.
- $35 annual fee.
Ideal for balance transfers
If you have high interest credit cards and have a balance, you could be paying a lot of money in interest each month. By finding a low interest card, preferably with an introductory rate of 0%, you can transfer those high rate balances and save money. The trick is to pay off the balances before the introductory rate expires and not accumulate them again.
Here are the best credit cards for balance transfers.
Visa Platinum Union Bank
- 0% APR for the first 15 months on purchases and balance transfers.
- No balance transfer fees for transfers within the first 60 days. After that, the balance transfer fee is 3%.
- 10.74% – 22.24% Variable APR after introductory period.
- No annual fee.
Having a credit card with a low interest rate can significantly increase your budget, but paying off your cards is the best strategy of all. If you can’t do that right away, transferring those balances from a high-interest card to a low-interest card can be a great first step.
Rates are subject to change; unless otherwise specified, prices are updated periodically. All other account information is accurate as of September 1, 2022.
Editorial note: This content is not provided by any entity covered by this article. Any opinions, analyses, criticisms, evaluations, or recommendations expressed in this article are those of the author alone and have not been reviewed, endorsed, or otherwise endorsed by any entity named in this article.