How We Categorize Cards
We assign a category to each credit card in our database, and a card can go in only one category. Heres how we define them:
- Business credit cards: Cards that small-business owners can apply for and use to make purchases for their companies
- Cash-back credit cards: Cards that offer cash back on most purchases you make with the card
- Travel rewards credit cards: Cards that allow you to earn extra points or miles on travel purchases, either with specific travel brands or on a variety of travel-related expenses cards that offer high-value travel redemption options are also part of this group.
- Student credit cards: Cards for college or graduate students who are at least 18 years old
- Secured credit cards: Cards requiring a security deposit thats usually the same amount as the credit limit these cards are aimed to help people with poor or no credit build credit.
- Store credit cards: Cards you can use at particular retail stores and sometimes, other places they often offer discounts or rewards for purchases made at the associated store .
- Other: Cards that do not fit any of the following categories: business, cash-back, student, travel, secured, and store this includes cards that offer very fewif anyfeatures.
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What If You Just Make The Minimum Payments
The minimum payment is the smallest amount you can pay each month without going into default and then potentially incurring a late fees or having a negative impact on your credit rating.
Your minimum payment is applied towards that months interest charges and then the remaining amount, which will be very low if you are only making the minimum payment is applied to the principal .
Making minimum payments will keep the card in good standing and help protect your credit rating but you will end up paying far more than the cost of your purchase.
Regulation has now made credit card companies add a warning to your credit card statement showing how long it will take you to pay off the balance if you make only minimum payments.
Take a look on your statement and you will be shocked!
They put a warning on cigarette packages because they are a serious danger to your health and in the same way they have added a warning on the credit card statements as they can be a serious danger to your financial well-being.
What Is The Difference Between Fixed Rate And Variable Rate Credit Cards
When youre comparing low interest credit cards, youll notice that there are two types, fixed rate credit cards and variable rate credit cards.
A fixed rate low interest credit card has the same interest rate throughout the year, while the variable rate low interest credit card has a fluctuating interest rate. This variation depends on two important factors, one being the banks current prime rate and the second being your credit score. If you have a low credit score , you may not be able to take advantage of some of the interest rate discounts that come with the variable rate, low interest credit card.
- Fixed rate credit cards – The benefit of fixed rate credit cards is that youll know what interest rate youll be charged every billing cycle. The rate of interest wont be affected by the banks prime rate or your creditworthiness. Fixed rate credit cards usually come with limited-time balance transfer promotions you can use pay off your existing credit card debt.
- Variable rate credit cards – The advantage of holding a variable rate credit card is that you can get a very low rate , but this usually only comes with excellent credit. The disadvantage is that you might be stuck with a higher rate if your credit score isnt great or if the banks prime rate increases.
If you have a credit score lower than 670, stick to a fixed rate, low interest credit card.
Read Also: Do Subsidized Loans Have Interest
Why Are Credit Card Interest Rates So High
Have you ever wondered why your credit card interest rate is so high? With prime rate near a record low, cardholders are often astonished why their credit card interest rates remain so high. While the interest rate is 19.99% on a typical credit card, prime rate is only 2.7% . Although some credit cards offer low introductory rates, a higher rate kicks in later on often in only six months to a year.
When Do You Pay Interest On A Credit Card
A balance on a card accrues interest when carried. In other words, if you donât pay your credit card bill in full by the end of the month or billing period, any balance remaining will accrue interest at the rate determined by the cardâs terms. This interest will be added to the balance and the account holder will be required to pay it off before closing the account.
Read Also: Interest Rate For Federal Student Loans
Examining The Factors Driving High Credit Card Interest Rates
When consumers face unexpected expenses and lack the cash to make it from one paycheck to the next, credit cards can provide essential flexibility. More than 175 million Americans have at least one credit card, and at any given time, about half of active credit card accounts carry a balance.
In the coming months, even more people may turn to their credit cards, as increasing prices for necessities like groceries and gas upend their budgets. But this borrowing comes at a cost. With todays interest rates, a person with a $5,000 credit card balance could pay an additional $1,000 in interest over the course of a year. Consumer reliance on credit cards as a source of borrowing justifies a closer look at whats driving interest rates, as credit card market profitability increases.
How To Pay Less Interest
Paying off your balance in full and on time with every monthly statement lets you avoid credit card interest charges on your purchases.
Many credit cards offer a balance transfer at a lower promotional interest rate. By transferring balances at higher interest rates to another credit card account with a low promotional APR, you can save on interest during the promotional period.
Many new credit cards offer a low introductory APR on purchases, balance transfers, or both for a promotional period to help you save on interest. After the promotional period ends, your standard interest rate will apply.
Also Check: Interest Rate For Investment Property
Stubborn Inflation Puts Pressure On Fed To Aggressively Hike Rates
The Feds key policymakers are scheduled to meet next week to discuss the central banks next move and decide how much further to push up rates.
After increasing rates by a dramatic 2.25 percentage points this year, policymakers have made clear they arent done increasing rates in order to help arrest stubborn inflation. But just how much further the central bankers will go is currently unknown.
The Bureau of Labor Statistics reported Tuesday that prices were continuing to weaken in some key areas, such as gas. But after pausing briefly earlier in the summer, the Consumer Price Index rose by 0.1 percent in August, thanks in part to rising prices on a variety of essential goods and services, including housing, car repairs and medical care.
As a result, calls for another aggressive rate increase grew louder this week, with some analysts pushing for a late September rate increase as high as 1 percent.
Usually, the Fed opts for a more gradual path to higher interest rates, typically increasing the federal funds rate by just a quarter of a percentage point at a time. But the Fed is hoping that a much more aggressive approach to monetary policy this time around will finally help arrest the stubborn inflation that has repeatedly surprised them.
As a result, its likely that the next rate hike the Fed announces will be just as large, if not larger, than the last ones.
This year, by contrast, the Fed took less than five months to do it.
Learn More About The Home Trust Secured Annual Fee Visa Card
The Home Trust Secured Annual Fee Visa Card is a secured credit card, which means itâs extremely easy to get but requires a security deposit equal to the credit limit of the card. For example, if you applied for the credit card with a $2,000 credit limit, you would need to put down a deposit of $2,000. You can use it just like a regular credit card, and the purchase interest rate is 14.9% â not the lowest on this list by any means but still five percentage points lower than standard credit cards. There is an annual fee of $59 for this credit card, and itâs not available to residents of Quebec.
Why we like it:
This or with no credit score at all. You can apply for this credit card and use it to build up your credit before you graduate to an unsecured credit card. You can apply for this credit card if you have been discharged from bankruptcy or if you are in Consumer Proposal.
Additional perks:
Some secured credit cards have limited uses, but you can use the HomeTrust Secured Annual Fee Visa Card just like a regular credit card, including making purchases online, over the phone, and at 24 million locations across the globe.
Also Check: Savings Account Interest Rate Calculator
How Do I Lower My Credit Card Interest Rate
If youâve demonstrated responsible spending and credit habits, a lender may be willing to lower the interest rate on an existing card. Thereâs no guarantee a card issuer will lower your interest rate, but if youâre worried about or planning to carry a balance , you can contact your issuer about a rate reduction. If a rate reduction isnât possible and you need another solution, explore transferring a balance to a new card with a lower APR and/or an introductory APR offer.
Q: What Is The Interest
A: With any credit card, theres a window that starts from the closing date on their statement and ends on the payment due date. The interest free grace period is usually 21 to 25 days if you pay off your entire statement balance by the payment due date, your billed purchases will be charged zero interest. Note: this is dependent on when the credit card issuer receives payment and only applies to purchases. See below for how some of the other transaction types are treated!
But if youre late on your payment, or you pay just the minimum due , youll be billed interest on those billed purchases on your next statement.
Don’t Miss: How Do Credit Card Interest Rates Work
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We believe everyone should be able to make financial decisions with confidence. And while our site doesnt feature every company or financial product available on the market, were proud that the guidance we offer, the information we provide and the tools we create are objective, independent, straightforward and free.
So how do we make money? Our partners compensate us. This may influence which products we review and write about , but it in no way affects our recommendations or advice, which are grounded in thousands of hours of research. Our partners cannot pay us to guarantee favorable reviews of their products or services.Here is a list of our partners.
Should You Use A Cash Advance To Pay Down Credit Card Debt
A cash advance is when you use your credit card to withdraw cash from the automatic bank machine or write a cheque the credit card company conveniently provided.
Obtaining cash from your credit card usually incurs a higher interest rate and theres no grace period so the daily compounding interest begins immediately at the higher rate on the amount you have withdrawn.
So as a way to get out of debt, its not a good strategy.
Read Also: Compound Interest Calculator With Withdrawals
Low Interest Credit Cards
Low-interest credit cards can offer compelling features, convenience and security all at once.
- Enjoy options that allow you to have an interest rate as low as 8.99% on purchases while still having the advantages of an MBNA credit card. Annual fee of $39.
- Your low interest credit card is equipped with security measures to help keep your finances and valuable information protected.
- Take advantage of Apple Pay for a safe, quick and convenient way to pay with an MBNA credit card.
Product rates and fees may vary across different regions.Your region is currently set to
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This Promotional Rate applies to any balance transfers made within 90 day of your account opening and will remain in effect for 12 Statement Periods from the transaction date of each eligible transaction. The Promotional Rate will increase and the remaining balance of the eligible transaction will become subject to the Standard Rate for balance transfers either: on the first day of the first Statement Period that occurs after the expiry of the Promotional Rate or on the first day of the second Statement Period following any late Minimum Payment.
BALANCE TRANSFERS
How We Compared And Chose The Cards
We compared and chose each credit card based on a holistic assessment of the value of each card. Obviously, the card had to have a low interest rate. But that wasnt the only thing we considered. We also took into account interest rates on cash advances, balance transfers, the annual fee as well as any perks to get a bigger picture of the total potential costs and benefits. For example, a slightly higher annual fee may be worth it if the card also offers discounts or insurance.
Also Check: What Are Interest Rates Currently
What Kind Of Credit Card Are You Looking For
Earn up to 3% cash back2 everywhere Mastercard is accepted. Exclusively for Costco members.1
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Join and get over $1,200 in value.
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Join and get up to $1,050 in value in your first year.
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Get a first-year annual fee rebate for you and up to 3 Authorized Users.
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Apply For A Credit Card At A Credit Union
If a low interest rate is a priority, you can also consider a Your credit scores will still influence your interest rate, but these not-for-profit institutions are known to have lower interest rates compared with financial institutions like big banks. As of December 2021, the average interest rate for a credit card at a credit union was 11.21%, according to the National Credit Union Administration.
Ultimately, a “good” interest rate for a credit card is a bit of a moving target your own rate will depend on your credit scores, the type of credit card you’re applying for, the issuer of that card and economic factors like the prime rate.
About the author:Melissa Lambarena is a credit cards writer at NerdWallet. Her work has been featured by The Associated Press, New York Times, Washington Post and USA Today. Read more
Read Also: Reverse Mortgage Interest Rates 2021
How To Lower Your Interest Rate
To lower your interest rate on your current card, you can try negotiating with your credit card company. Call your current credit card issuer and ask to speak with a representative.
Youll have a much better chance of lowering your rate if youve consistently made your payments on time, have a good credit score or have improved your score since your account opened, and if youve been a customer for a while. Dont forget to mention better rate offers that youve received from other issuers.
What Are The Most Common Features Of Low Interest Credit Cards
Most low interest credit cards come with a no annual fee, and typically no rewards. This is because they are specifically designed to make it easier for you to pay your recurring credit balance. Most low interest credit cards do not offer perks though because the low interest rate itself is considered the perk.
Also Check: Pnc Savings Account Interest Rate
Interest Rates For Travel Credit Cards
Airline and travel credit cards can have higher interest rates than the typical card because they offer valuable rewards if used correctly. These credit cards are good options for anyone who wants to earn perks like miles to book award flights, but doesn’t plan to keep a balance on their card.
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Deserve® EDU Mastercard for Students |
20.99% Variable |
How Do I Choose The Best Low Interest Credit Card
That depends on how you manage your credit. Our variable rate card gives you a better rate, the better your credit rating. But, if the prime rate goes up or down, so does your cardâs interest rate. If youâre okay with a little change, a variable rate card may be the right choice. However, if you prefer peace of mind and the same low rate always, our fixed low rate card will help you save on interest costs, with no surprises.
Also Check: Capital One Saving Interest Rate
Rbc Rate Advantage Card
With the Rate Advantage Card, RBC incentivizes you to be financially responsible by offering a variable rate that changes according to your credit score. The better your rating, the lower your interesta program that could really pay off. As of this articles publication date, Royal Banks prime rate is 2.45%, so your interest rate would fall somewhere in the range of 7.44% to 11.44%. The better your credit score, the higher the likelihood your interest rate would fall at the lower end. This product doesnt offer much in the way of extras, aside from the ability to link to Petro-Canada for fuel savings, but it also commands no annual fee.
- Interest rate: Prime plus 4.99% to 8.99%
- Additional benefits: Link to Petro-Canada to save $0.03 per litre on gas purchase protection and extended warranty
