Credit cards are a great tool to help you gain some financial flexibility and freedom. That is a true statement only if you use them properly. When not used properly, credit cards will become your biggest nightmare. You have to start a good credit card using habits from the first moment you get a credit card. It is really hard to go back to better credit card use once you have dug yourself a hole of debt. Some of you are in the hole and are nodding your head. Others of you are wondering what in the world I am saying. Americans have $1.04 trillion in credit card debt and that continues to rise each year. According to USA Today, 60 percent of Americans pay large amounts of interest each month and cannot afford it.
Best Credit Cards with Low-Interest Rate
It is important for you to use your credit cards wisely so that you do not find yourself in the same situation as many Americans. In this article, I am going to talk a little bit about the basics of credit card use and how to stop yourself from getting out of control with debt. I am going to explain the importance of low-interest credit cards and highlight some of them for you.
When looking for low-interest credit cards, it important to remember that there are many options available to you. While a low-interest rate is super important, you still need to understand what else a particular credit card has to offer you. You may only carry a balance occasionally, so if a card gives you additional perks, you may choose one that has a slightly higher interest rate because it offers you more cash-back points. You have to look at everything the credit card is offering you.
Low-Interest Credit Card #1
The first credit card with low interest on my list is the Capital One Quicksilver Cash Rewards Credit Card. This credit card has an introductory offer of 0 percent interest for 15 months. That means you are not charged any interest for 15 months, however, after that period, your interest rate goes up to anywhere between 15.74 percent to 25.74 percent, depending on your credit. Most of the time, a credit card company will not extend that 0 percent interest, but you could always ask before that period of time ends.
There are some other perks this card offers you, such as an unlimited 1.5 percent back on every single purchase you make, every single day. And there are no limitations and you do not have to enroll in it, it is automatic. There is no limit on how much you can earn and no minimum for you to cash in your cash-back. Your cash-back does not expire, so you can continue to let it grow. This card does not have an annual fee and they offer a one time bonus of $150 after you spend $500 within 3 months of opening the account. Honestly, this is my favorite credit card.
Low-Interest Credit Card #2
The next card on the list of low-interest credit cards you should look at is the Discover It Cash Back card. This card comes with a variable rate of 13.49 percent to 24.49 percent. The interest rate depends on your credit score. With this card, Discover matches all the cash-back you earn in the first year. There is no limit on how much is matched. You do not have to sign up for this offer because it is automatic. You get 5 percent cash back at various places. The locations where you can receive cashback changes every quarter. You receive one percent cash-back for all other purchases. There is no limit to how much cash-back you can earn. You can redeem any amount you wish and the rewards do not expire. There is no annual fee with this card.
Low-Interest Credit Card #3
Capital One offers many low-interest credit cards, including the Capital One Venture One Rewards Card. This card has zero percent interest for 12 months, but then the interest rate goes up somewhere between 13.74 percent to 23.74 percent. You earn 1.25 miles for every purchase that you make every day. You earn bonus miles of 20,000 miles when you spend $1,000 on purchases within the first three months of opening your credit card account. This equals about $200 in travel money. You can travel whenever you want and you have no blackout dates. This card has no annual fee. The miles will not expire and there is no limit on how much you earn.
Low-Interest Credit Card #4
BankAmericard is up next as one of the top low-interest credit cards. This card has an interest rate of 14.49 percent to 24.49 percent variable rate. It has an introduction rate of zero percent interest for 18 months. There is no annual fee for this card. This card does not penalize you if you make a late payment. Your interest rate does not increase with a late payment.
Low-Interest Credit Card #5
City Rewards + Card is another great option as one of the low-interest credit cards. This card has a zero percent interest rate for 15 months but then goes up to 14.99 percent to 24.99 percent interest. You can earn bonus points of 15,000 after spending $1,000 on purchases after three months of opening your account. When you use this card, it rounds up to the nearest 10 points every time you make a purchase. There is no limitation on points.
Low-Interest Credit Card #6
Bank of America Cash Rewards credit card is next on the list of low-interest credit cards that you should consider. There is an introductory rate of zero percent interest for 15 months. After the 15 months, the rate goes up to 15.49 percent to 25.49 percent. You can earn 3 percent cash-back in a category you pick. Then you get 2 percent at grocery stores and wholesale clubs and unlimited 1 percent on all other purchases. There is not an expiration date and no annual fee.
Low-Interest Credit Card #7
Last but not least, you must also check out the Chase Freedom card as one of the low-interest credit cards. This card comes with a zero percent introductory rate for 15 months. After that, the interest goes up to anywhere between 16.49 percent to 25.24 percent after that. You can earn five percent up to $1,500 in bonus categories that you choose. The categories change each quarter. You receive one percent cash back on all other purchases. Your cash-back rewards never expire and there is no minimum for redemption. This card also has no annual fee.
What Is A Credit Card?
You probably think you already know what a credit card is and how to use it. Maybe you do and maybe some of you only think of it as that piece of plastic that you carry around with you that allows you to buy items. It is important that you have a better understanding of credit cards. So, I am going to take these few moments and remind you of some credit card basics. This is also a great time to explain why low-interest credit cards are the best option.
That piece of plastic is backed by a bank, which means they are allowing you to borrow money with your promise to repay it. You are also responsible for paying any interest and fees. The bank allows you to borrow up to a certain amount of money. You can use it all at once or use only a portion of it. Any amount you use is due within 30 days. If you do not pay the amount in full, you must pay interest on the money you used but are not repaying right away. Interest is a confusing topic, so I will talk more about that later in this article.
No matter how much money you spend each month, there is always a minimum payment due. If you do not make at least the minimum payment, you are subject to fees and penalties. It can also negatively impact your credit score. You must be sure to pay at least the minimum each month. You really want to pay the entire amount each month, but many of us are unable to pay that much.
The way a credit card works is somewhat simple, as long as you have a complete understanding of it. If the credit card company extends you a credit limit of $3,000, that is how much you are able to use in any way you would like. If you use $500 of the available amount, you have $2,500 available to you. In about 30 days, you owe the credit card company $500. When you pay the full $500, you do not have any interest charges and your available balance goes back to $3,000. If you pay $300 of the $500, your available credit becomes $2,800. You are then charged interest for the other $200. This cycle continues each month.
What Is Most Important For Me To Know About Credit Cards?
There are many important items that you should know about credit cards before you starting using them. The first is, you have to remember that you are borrowing this money and you have to repay it. Another important fact is that each month the money you spent is added on to whatever you did not pay from last month. This amount adds up quickly. The better your credit score is means the better deals you can find for a credit card including low interest credit cards.
There are many different credit cards available, so it is important that you know the details about them before you pick one. You can easily compare credit cards online. Some credit cards have an annual fee, but many do not. An annual fee is a fee that you pay once a year for the credit card company to allow you to use their card. Some annual fees are incredibly high, as much as $300 or more. Some annual fees are low, around $20.
What Is Interest And How Does It Work?
Understanding interest rates and payments for your credit card is one of the most important things that you can do for yourself. Just about every credit card has some type of interest rate. Each one offers something different to each credit cardholder based on their credit score. Some credit cards offer introductory periods of zero percent interest. These periods are not forever but can be as long as 18 months. There are a number of credit cards that offer low interest and I am going to explain why that should be important to you.
There are two types of interest you are charged by the credit card company. One is called simple interest and the other is compound interest. Compound interest is when you pay interest on top of what you owe from being charged interest from the month before. This is how your credit card debt quickly gets out of control. I am going to explain this with numbers so that it may be a little easier for you to understand, but before I do that, I would like to highlight a few things.
Each credit card company decides what they are going to offer you based on your credit score. Credit card interest rates are variable, which means they change. A credit card company can change the interest rate of your credit card at any time. They do this based on your credit score. It is important that you work hard to maintain a high credit score. You can do this by paying all of your bills on time and in the amount that is due. You can also do this by working hard to keep your credit card balances low.
If you need help to find potential lenders and best credit cards, maybe we can help you. For example, our partner Fiona may offer credit card options based on your credit rating and the purpose of the card.
Back to the point, which is how interest charges work against you. These numbers are for explanation purposes only. They are not a reflection of what you may see in real life with your credit cards. I am only trying to help you understand how interest works.
Taking the scenario I mentioned earlier where you spent $500 on your credit card, but only paid $300 of it. You still owe $200 and your available balance is $2,800. This means you are charged interest on the $200. Your interest rate is 10 percent. 10 percent of $200 is $20. That $20 is added to your balance due.
$200 (still owed) + $20 (interest charges) = $220 new balance
Your available credit is now $2,780.
So the next month you spent another $300. You now owe $520 and your available credit is $2,480.
When your next bill comes, you owe $520 (remember $20 is interest from the month before).
You pay $320, so you still owe $200, which is charged 10 percent interest.
$200 (still owed) + $20 (interest charges) = $220 new balance
This continues each month that you do not pay off your credit card balance. I have given you an example with low numbers but imagine if it was thousands of dollars how quickly it could get out of control.
I do not believe that there is any card worth paying an annual fee, so I would suggest you find one that does not charge you to use it. However, there are some that offer items such as airline miles and if you travel often, this may save you a lot of money long term and make the annual fee worth it. You need to understand what perks the card gives you and balance if it is worth it.
You should understand that if you do not make your minimum payment, you are charged a fee by the credit card company. That fee can vary from company to company, but most will charge you. If you go over your available balance, the credit card charges you a fee for that, too. Credit companies must disclose all of this information to you, but you have to read the fine print to see it.
You learned a lot in this article about low-interest credit cards. While the interest rate is important, be sure to understand all the information about the cards you are considering. Sometimes, the card with a slightly higher interest rate gives you other perks making it a better card for you. No matter which card you select, make sure you use your credit card wisely and do not get yourself into a debt hole and you cannot dig yourself out.
Julia Peoples is a long-time business manager focused on providing decision making assistance to the public. She works with people at key points of their lives who are making important retirement and financial decisions. She has had many articles published that educate the public on sound financial decision making.
Julia writes for those who are working towards financial freedom or a better understanding of how finances work. She has shared her financial insights with individuals on a one on one basis for years.