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Low Interest Credit Cards

The choice to carry which credit card in your wallet is influenced by a variety of  reasons and is often extremely personal. You may want to consider getting a travel rewards credit card to help you accumulate points. A no-fee credit card may be more significant to you if you're a student. If your credit history isn't ideal, you may want to consider getting a secured credit card to help you rebuild your credit.

Above all, if you anticipate you'll be carrying a load month to month, you should look for the credit card with the lowest interest rate. Getting out of credit card debt is challenging enough, but paying off your bill with a high interest rate makes it much more challenging. Here are some of the benefits of low-interest credit cards, along with instances of why they could be the best option for you.


Pros of Low Interest Credit Cards

The aim of a low interest credit card is straightforward: if you can't pay off your debt in full each month, you'll pay less interest. However, there are a few more compelling reasons to have one in your wallet:

  • Low interest rate on purchases, cash advances and balance transfers
  • Low annual fees


Cons of Low Interest Credit Cards

There is a disadvantage to every advantage. Here are a few reasons why you should avoid getting a low-interest credit card:

  • There are less incentives or advantages, such as insurance or travel advantages.
  • Low interest rates may lead to consumer debt for certain individuals.
  • Balance transfers are almost always subject to a charge (typically 1 percent of the balance that is transferred).

When to Use a Low Interest Credit Card

Even while using a low-interest credit card makes the most sense when you have a debt to pay off, there are a few other good reasons to do so. The first is to make purchases, which is self-evident. A low interest credit card, whether used daily or kept on hand for emergency costs, might help you pay less interest than you would on a standard credit card if you can't pay off the debt each month.

You might also take out cash advances with your low-interest credit card. Most personal financial gurus will advise you that you should never take out a cash advance – and we agree – but if you must, a low-interest credit card might be a useful tool.

Finally, debt transfers are one of the most popular reasons consumers apply for low-interest credit cards. Whether you have a balance on one or more cards, you may consolidate all of your debts into a single low-interest credit card, resulting in a single monthly payment with a considerably reduced interest rate. If you have a mortgage, you may want to explore consolidating your debt and refinancing to a cheaper rate.


Example of How a Low Interest Credit

Card Can Save You Money

Consider how transferring a load to a low-interest credit card might help you save money.

Sarah owes $1,000.00 on a credit card with a 19.99 percent annual interest rate and $5,000.00 on another credit card with a 19.99 percent yearly interest rate. She intends to pay off both cards in a year, but the hefty interest rates are weighing her down. Sarah accepts an offer for a low-interest credit card with a 1.9 percent debt transfer bonus for the next 12 months. If she pays off the $6,000.00 sum on the new card in 12 months, how much would she save in interest costs?

Here's what Sarah's interest and total charges would be if she retained her two cards and pushed herself to pay them off within a year:

                                                       Credit Card 1 Credit Card 2 Total

Principal                                        $1,000.00         $5,000.00 $6,000

Annual Interest Rate                     19.99%         17.99%        18.32%

Interest Accrued in 12 Months      $111.56         $500.56    $612.12

Total Paid                                      $1,111.56          $5,500.56 $6,612.12

Monthly Payment                          $92.63              $458.38           $551.01


In this case, Sarah's monthly payments would total $551.01, plus $612.12 in interest over the course of a year. To pay off her $6,000.00 debt, she would have to pay $6,612.12 in total.

Here's how her new costs would stack up if she moved the balances of both cards to one low-interest credit card with a 1.9 percent APR:

                                                      New Card Old Cards Difference

Principal                                      $6,000.00 $6,000.00

Annual Interest Rate                    1.9%        18.32%

Interest Accrued in 12 Months    $61.93 $612.12            $550.19

Total Paid                                    $6,061.93 $6,612.12   $550.19

Monthly Payment                        $505.16 $551.01            $45.85


Sarah may reduce her monthly payment by $45.85 and avoid paying $550.19 in extra interest fees by transferring her debt to a low-interest credit card. To pay off her $6,000.00 debt, she would only have to pay $6,061.93 in total.

Even if her new low-interest credit card included a tiny annual charge (typically between $0 and $30) plus a balance transfer charge (1 percent would be $60), the savings from the balance transfer would surpass the cost and she would still save hundreds of dollars.

We hope you never find yourself in a scenario where you have a huge credit card amount that you can't pay off, but if you do, know that you have choices. One approach to keep your monthly carrying expenses low is to use a low-interest credit card. If you're certain you'll be able to pay off your debt during the offer period, transferring your balance to one of these cards might save you hundreds of dollars in interest.