Best Cards Summary
Discover it® Cash Back
Why this is one of the best low-interest credit cards: With Discover it Cash Back, you’ll get a 14-month 0% APR on purchases and balance transfers. After that, there is a 11.99% to 22.99% variable APR. Cash back rewards sweeten the deal, offering 5% cash back each quarter in rotating categories, such as Amazon.com, grocery stores, restaurants, gas stations and when you pay using PayPal, up to the quarterly maximum when you activate. All other purchases earn unlimited 1% cash back. There’s no annual fee, and Discover will match your cash back earnings at the end of the first year.
Discover it® chrome
Why this is one of the best low-interest credit cards: Discover it chrome gives cardholders a 14-month 0% introductory APR for purchases and balance transfers and no annual fee. After that, there is a 11.99% to 22.99% variable APR. Gas and restaurant purchases earn 2% cash back on up to $1,000 in combined purchases each quarter, and 1% cash back on all other purchases. You’ll pay no annual fee for this card.
Citi® Diamond Preferred® Card
Why this is one of the best low-interest credit cards: This card has real appeal for those looking to do a balance transfer. An 18-month 0% annual percentage rate for transfers made within four months of opening your account can help you pay off lingering balances. After that, there is a 14.74% to 24.74% (variable) APR.
Blue Cash Everyday® Card from American Express
Why this is one of the best low-interest credit cards: The most creditworthy applicants will score a low annual percentage rate on this card, but it’s the best fit for consumers looking to earn cash back on everyday purchases. You’ll get 3% cash back on up to $6,000 annually at U.S. supermarkets and then 1% back; 2% back at gas stations and department stores; and 1% back on other purchases. New cardholders earn $100 back after you make $1,000 in purchases on your card within the first six months. You’ll also earn 20% back on Amazon.com purchases made within the first six months (up to $200 back).
American Express Cash Magnet® Card
Why this is one of the best low-interest credit cards: Those looking for flat-rate cash back may like the 1.5% back on all purchases this card delivers. Good credit standing lets you access the lowest annual percentage rate offer, plus all new cardholders get 0% APR on purchases for 15 months.
Citi® Double Cash Card
Why this is one of the best low-interest credit cards: The 18-month 0% introductory annual percentage rate on balance transfers is a top benefit. After that, there is a 13.99% to 23.99% (variable) APR. You’ll get 1% cash back when you make a card purchase and 1% back when you pay your bill. Plus, if you carry the occasional balance, the APR is below average for a rewards credit card.
Discover it® Miles
Why this is one of the best low-interest credit cards: Discover it Miles earns unlimited 1.5 miles per dollar on every purchase, which can be redeemed for cash or travel. Discover will automatically match all the miles you’ve earned at the end of your first year. There’s no annual fee, and cardholders get a 14-month 0% introductory APR on purchases (then a 11.99% to 22.99% variable APR applies).
Wells Fargo Visa Signature® Card
Why this is one of the best low-interest credit cards: Applicants with strong credit will get a low annual percentage rate on purchases, but the bonus cash back is the real draw of this card. You’ll earn five points per dollar on up to $12,500 spent on gas, grocery and drugstore purchases in the first six months; all other purchases earn one point per dollar.
What You Can Expect From Low-Interest Credit Cards
Here’s what you should expect from low-interest credit cards:
APR: All of the low-interest cards surveyed range from a 0% APR to a 15.99% APR.
Introductory APR: About 17% of the cards in this category have a 0% APR offer of around 18 months. A 14- or 15-month 0% APR offer is more common, but it pays to shop around.
Balance transfer offers: About a third of the cards surveyed in this category have a 0% balance transfer offer of 18 months or longer. The rest have a 14- or 15-month 0% APR balance transfer offer.
Annual fee: None of the low APR cards surveyed charge an annual fee.
Credit needed: More than half of low APR credit cards require good or excellent credit, but options are available for average, fair, limited or new credit.
U.S. News Survey: Consumer Credit May Not Be Ready for a Recession
U.S. News asked consumers whether they are concerned about a recession and how they are preparing financially. About 41% of consumers are not concerned about a recession within the next six months. Many don’t have an adequate emergency fund, and few are taking steps to lower credit card annual percentage rates.
Few consumers are preparing financially for a recession.
Nearly 30% of respondents said they are concerned about a recession occurring within the next six months, but less than 15% are working to prepare financially. About 41% are not concerned about a recession within the next six months.
Job cuts are the chief concern for most consumers.
About 29% of respondents said job cuts would be the worst potential financial effect of a recession for them. Following that are falling house values, rising credit card debts, tumbling interest rates and more difficult credit approvals.
Almost half of consumers are not prepared for a recession with an adequate emergency fund.
Close to 45% of respondents either don’t have an emergency fund or have less than three months of living expenses saved. But about a quarter are well-prepared, with almost 25% of respondents saying they have enough saved for 13 or more months of living expenses.
Consumers aren’t doing much to recession-proof their credit.
About 47% of respondents aren’t taking important steps to protect their credit during a recession. Just 22% are paying down their credit card debt and only about 14% are boosting their emergency fund. Even fewer are considering lower APRs for credit cards, with less than 4% opening a low-APR card for emergencies and about 3% requesting lower APRs on existing credit cards.
Many consumers have minimized revolving credit card debt.
Almost 67% of respondents have less than $3,000 in revolving credit card debt, including about 44% of respondents who have none. But some have higher levels, with more than 15% carrying $10,000 or more of revolving credit card debt.
Almost half of consumers aren’t following proven plans to pay off or pay down card balances.
About 16% said they plan to tighten their budget and stop using credit cards, while about 9% each either plan to pay off cards starting with the highest APR or starting with small balances. Around 4% or less each either plan to apply for a debt consolidation loan or balance transfer card, or don’t plan to pay off or pay down balances at all. About 55% said they don’t plan to take any of the recommended actions to pay off or pay down credit card balances.
About a quarter of consumers don’t know their FICO credit score, but many who do know their score are in good shape.
Almost 25% of respondents said they don’t know their FICO credit score. However, more than 60% have a FICO score that’s at least good. More than 25% have an exceptional credit score of more than 800.
Most aren’t trying to improve their credit score.
Just 33% said they are taking or planning to take steps to improve their credit score. The rest either don’t plan to do so, or are undecided.
Paying down credit card debt is the most favored step for credit score improvement.
About 29% said they are paying down credit card debt or planning to do so to improve their credit score. Other less popular options are using 10% or less of available credit, asking for a higher credit limit or opening a new card with a high limit.
Most consumers don’t plan to rely on credit cards during a recession.
Just 18% of consumers plan to use a low-APR card for emergency expenses, and about 8% said they need cards to cover monthly expenses. About 5% plan to transfer balances to a low-APR credit card.
What Are the Types of Low-Interest Credit Cards?
Low-interest cards have APRs that are lower than average or that have 0% APR introductory offers for a certain period of time on purchases or balance transfers. These cards are a good option for consumers who intend to make several large purchases and basically need to carry a short-term balance. Low-interest credit cards are also a good choice for consumers who need to do a balance transfer and can pay off – or at least, pay down – their debt during the introductory period.
Let’s take a look at the two types of low-interest credit cards:
- Zero percent introductory APR credit cards
- Low APR credit cards
Zero percent introductory APR credit cards
Zero percent introductory APR credit cards offer 0% APR on purchases, balance transfers or both for a set period of time, usually 12 to 18 months. Note that the introductory periods for 0% APR cards can differ in length. For instance, the card might offer a 0% APR on balance transfers for 21 months, but the 0% APR on purchases might only last for 12 months.
These offers are available to new cardholders making purchases or transferring a balance onto the new card. With 0% introductory APR offers, you have a set period of time to pay off your balance without paying interest. If you pay your balance in full by the end of the promotional period, you won’t pay any interest at all.
Once the promotional period is over, interest will begin accruing at the “go-to rate” on any remaining balance. Be sure you’re aware of the lengths of intro periods so you can plan your monthly payments. You want to make sure you’ll be debt-free, or at least closer to that, before your new, much higher APR kicks in.
You’ll typically need good credit (a FICO score of 670 or higher) to qualify for the best low-interest credit cards. Often, card websites indicate whether good, excellent or average credit is required prior to filling out the application. The predictions are often based on educational scores instead of FICO scores, but they still give you a sense of what credit range you fit into.
In addition to your credit score, card issuers will look at your debt-to-income ratio, which is how much recurring monthly debt you have compared with your gross monthly income.
Recurring monthly debt includes, for example, credit card payments, loans, and mortgage or rent payments. Other expenses, such as groceries, gas and taxes aren’t included in your DTI ratio.
Lenders use your DTI ratio to determine if you’re overextended financially. The reasoning is that if you have a high DTI ratio, you’re more likely to default on a mortgage or a credit card.
So, what’s an awesome ratio? A good guideline to follow is the 36% rule, which states that your DTI ratio should not exceed 36%. But this varies among lenders. Some mortgage lenders even accept 43%, and there are FHA-insured loans that accept a DTI ratio of 50%.
Before you apply for a credit card, it’s a good idea to calculate your own ratio. It’s an important thing to know because if it’s high, you should reconsider applying for more credit at this time.
If your ratio is low, which is around 20%, it implies that you’re in a good position to pay your balance.
Potential lenders also review your credit report and if you have delinquent accounts or a history of bankruptcy, you might not be approved for a new low-interest credit card or for 0% introductory APR credit card offers.
Once you’re approved for a balance transfer credit card, you’ll most likely have a time limit to do the transfer. The time limit is usually within a couple of months, which varies by issuer, but you’ll typically have anywhere from 60 to 90 days to complete your transfer, starting with the date your new account is established.
Don’t put off starting the transfer process because it can take several weeks to complete, from start to finish. Make sure you continue to make payments on the credit card that had your original balance. Call the issuer and also check your account online to determine if the transfer has been done. If you miss payments during the transfer stage, you could get hit with late fees and other penalties. Your credit score might take a dive, too, if the late payment gets reported to the bureaus.
The introductory 0% APR lasts for the duration of the promotional period. This period varies depending on the card, but is usually between 12 and 18 months, although a few offers last as long as 21 months.
All payments made during the introductory period will apply directly to the principal debt, assuming you haven’t made any charges subject to interest. If you’re paying down a balance, not having to pay interest during this time shrinks the principal amount of debt faster.
When comparing balance transfer offers, note what the transfer fee will be for each card. There are a few cards that will waive the fee, but the intro periods for these credit cards might also be shorter
There are three different types of balance transfer fees:
- Percentage of the balance transferred. This is typically 3% to 5% and is imposed immediately or within a specified number of days of the balance transfer approval.
- Minimum flat fee. Some credit card issuers charge a percentage of the balance transfer amount or a fee of $5 to $10, whichever amount is greater. This is charged immediately or within a specified number of days of the balance transfer approval.
- No fee. The card issuer does not charge for balance transfers at all or doesn’t charge for a period of time (usually 60 days) after the account is opened. After the free transfer period is over, you may have to pay a percentage or flat fee to perform a balance transfer.
Balance transfer fees are applied on top of the amount of the balance transferred. Remember to take balance transfer fees into account when calculating what your monthly payment must be to pay off the balance during the intro period. In most cases, you’ll still end up saving money on compound interest, but this exercise tells you if you still come out ahead after paying the transfer fee.
Limitations on what can be transferred
Credit card issuers generally place limitations on the type of debt you are allowed to transfer. Often, balances can’t be transferred between credit cards issued by the same financial institution. For instance, if you have a Chase credit card with a balance, you can’t transfer that balance to another Chase credit card.
In addition to credit card balances, some financial institutions allow transfers on outstanding balances from other loans and installment debt. The fine print of the balance transfer offer will state the type of debt you’re allowed to transfer.
Important note: If you’re consolidating debt held by someone else, such as a spouse, keep in mind that any debt transferred onto a balance transfer card then becomes the responsibility of the account owner.
Your balance transfer amount can’t go over the credit limit set on the new card. So, you might not have the opportunity to transfer every last cent of debt you owe, but you can still transfer what’s allowed and make some progress.
To transfer small balances from multiple cards, you have to decide which card balances you want to pay first. You then provide the new credit card issuer the account numbers and payment amounts for each balance you want to transfer.
Interest charges for new purchases
While some balance transfer cards extend the 0% offer to include new purchases, not all do. If the card does not have a 0% APR on new purchases, any payment amount above the minimum monthly payment will go toward paying the new purchase balance rather than the transferred balance.
According to the Credit Card Act of 2009, when a card has balances calculated at different interest rates, card issuers must apply payments above the minimum to balances with the highest interest rate first. While this can save you interest charges, it also makes it more difficult to pay off the balance with 0% if there are new charges added to the card that are subject to interest. This is only one of several reasons you don’t want to use your balance transfer card for new purchases.
According to U.S. News research, the average APR for all credit cards is between about 17% to 24%. Credit cards with a low ongoing APR have an interest rate that’s below average. These low-interest credit cards also might include a 0% APR introductory offers.
Low-interest credit cards are ideal for consumers who need a card with a low APR in case a short-term financial emergency arises. For those who can’t qualify for a 0% introductory APR balance transfer offer, transferring a balance to a card that has a lower interest rate than your current one still has monetary benefits.
It’s not a good idea to use a credit card to finance a large purchase over time. If you’re sure you can pay it off before the intro period ends, that’s fine. But keep in mind that if your balance is so large you can’t pay it off before the intro rate ends, then reconsider using a credit card. If you’re going to pay interest, a personal loan could be a cheaper choice.
Balance transfer cards are a better choice for existing credit card balances
Keep in mind that a low interest credit card does not always mean it has a 0% APR. If you have existing debt, a card with a 0% APR on balance transfers is the better option for saving money on interest.
But if you don’t qualify for the top offers, abalance transfer card is still a possibility. Let’s say you have a $5,000 balance on a credit card with a 23.99% APR. If you can transfer your balance to a credit card with a 10.99% APR introductory offer for 12 months, then you’ll at least save some money.
Transferring debt to a low-interest credit card still incurs interest payments, but it’s better than paying interest at the original higher rate.
How Can You Save With a Low-Interest Credit Card?
All it takes is some simple math to figure out if a balance transfer card or a low-interest credit card will save you money in the long run. To get started, you have to read the terms and the rates and fees to do the calculation.
Let’s take a look at a few scenarios, and you’ll see how easy it is to calculate your savings (or lack of savings).
Saving money with a balance transfer card
A consumer has an outstanding credit card balance of $3,500 with an 18% APR and can make payments of $150 per month. Would it be better to switch to a balance transfer card with 0% APR for 15 months? In this case, yes:
Balance Transfer Card
$3,605 (principal + fee)
0% for 15 months and 18% thereafter
|Balance transfer fee||
|Time to pay off||
|Total amount paid||
|Amount of interest paid||
Keep in mind that the balance transfer fee raises the principal debt amount to $3,605. Paying $150 per month with 0% for 15 months pays off $2,250 of the principal. When the promotional period expires, there’s still outstanding debt of $1,355.
Although that amount now accrues interest, it’s doing so on a smaller outstanding balance. Because the interest charges are less, each monthly payment stretches further, requiring just 10 monthly payments after the promotional period is over. This results in more than $600 in savings and a faster repayment.
Saving money with a low APR card
If you use a low APR card that has no outstanding balance to buy an item that costs $2,500 and pay $150 per month toward that balance, how much will you save by the time you’ve paid it off?
Low APR card
|Total amount paid||
How Can You Choose a Low-Interest Credit Card?
If you have very good credit, you have an abundance of choices when it comes to low-interest credit cards. But before you apply for a low-interest credit card, research the terms and conditions (and the rates and fees) of each card to find the best fit. And don’t forget to consider the length of the intro period if it’s a balance transfer card.
Here are six simple steps to take to find the right low-interest credit card.
1. Determine whether you need a 0% introductory rate or low APR card, or both.
A card with a 0% introductory offer on balance transfers or purchases is good for consumers who need to make a large purchase or pay down or pay off a large balance in a specified time window.
A low APR card, on the other hand, is a good credit card to have in your wallet. Sometimes, life is unpredictable and expensive. Low-interest credit cards can be a lifesaver if you have a financial emergency. If you find yourself in a sticky situation and need to carry a balance for a few months, you’ll have a card to use that charges low interest.
2. Compare interest rates.
Research low-interest credit cards and compare APRs to find the card that fits your needs with the lowest available interest rate. Keep in mind that other factors, including balance transfer offers, annual fees and other fees, may outweigh the benefit of having the absolute lowest APR.
Some, but not all, credit cards charge annual fees. If you’re using a balance transfer card to pay down debt, annual fees can impede your progress. If you choose a credit card with an annual fee, be sure that the reduction in interest charges is greater than the fee.
4. Understand late fees and penalties.
If you make a late payment, there can be significant penalties, including late fees and loss of your balance transfer offer. Late fees can be as high as $39 for each late payment. Some cards also apply a penalty APR if your payment is more than 60 days late. This rate is often significantly higher than the regular APR. Pay attention so this doesn’t happen to you. Set up text or email reminders so you never miss payments
5. Compare cardholder benefits.
Many credit cards have benefits, including travel insurance, rental car insurance and extended warranty coverage on purchases made with the card. When you take advantage of the perks, you get extra value from the card.
Many rewards cards – cards that offer cash back, miles or points with purchases – also offer balance transfer deals. Rewards cards usually don’t earn rewards on balance transfers. But really, it’s best to wait until the transferred balance is paid off before you use your card to make new purchases.
You can learn more about balance transfer cards and how they’re structured in the guide to the Best Balance Transfer Cards. For rates and fees of the Blue Cash Everyday Card from American Express, please click here.