Low rate credit cards typically come with a lower interest rate on purchases, balance transfers, and sometimes cash advances. Used responsibly, a credit card can help manage your finances and one with low rates can help a little more.
David Boyd, co-founder of Credit Card Compare, explains, "A credit card with low interest can save money if you carry a balance. It's better to pay off each statement balance in full so you can avoid having to pay interest."
Benefits of low rate credit cards
- Cost savings: If you end up carrying a balance, a lower interest rate means you will pay less interest over time.
- Debt management: If you have existing credit card debt, you can balance transfer to a significantly lower rate. They're also useful if you are planning to make a large purchase and need some time to pay off the debt.
- Financial flexibility: Low rate credit cards offer a cushion for unexpected expenses without accruing high interest charges.
What to consider before applying for a low rate credit card
- Credit score: Your credit score determines to a large degree whether you qualify for a credit card at all.
- Introductory period: Some low rate credit cards offer a low or 0% introductory rate for a limited time on balance transfers and/or purchases (sometimes both). Ensure you understand when this period ends and the standard rate that will apply at the end of this period.
- Fees: While the interest rate is a crucial factor, be mindful of other fees associated with the card, such as annual fees or balance transfer fees. They can add up and erode the benefit you get from a low rate card, especially if dealing with smaller amounts of debt.
How to choose a low rate credit card
When searching for a low rate credit card, consider the following factors.
- Interest rates: Compare the ongoing rate for purchases, balance transfers, and cash advances. Lower is better when it comes to interest rates. Check that the low rate isn't only for an introductory period.
- Introductory offers: Look for cards with introductory periods for balance transfers or purchases. A longer introductory period is generally better.
- Fees: Check the annual fees, late payment fees, balance transfer fees, and foreign transaction fees. Ideally you don't incur fees, but lower is better if you do.
- Rewards and benefits: Some low rate cards also offer rewards programs or additional perks, which may or may not be beneficial to you depending on your lifestyle.
