Interest can pose as a considerable expense on top of your primary purchases. While you should strive to avoid incurring interest on any purchase, life happens and a low-interest card can lessen the blow. For users looking for additional savings and access to affordable credit, a low-interest credit card is the answer.
How A Low-Interest Credit Card Saves You Money
Low-interest credit cards can save you money by not tacking on significant additional charges to the principal of your original charge. For example, if you purchase a $100 product with a credit card you are responsible for paying back the principal ($100), plus the interest which can range to an average high of 24% or more. A low-interest card will charge you in the lower range of <10% to 17.99%, costing you up to $17.99 a month in interest. This is opposed to higher-interest cards which can set you back 18% or more per month.
While these ranges aren’t significantly different at first glance, they can mean the difference in hundreds or thousands of dollars over time. This all depends on the range of interest, the balance on credit, and the time you take to pay it off.
The Difference Between Low Interest and 0% APR
Be aware that 0% APR is different from a low-interest credit card. 0% APR is typically a temporary introductory offer that credit card companies use to incentivize potential cardholders to apply. This intro offer traditionally is only offered to new cardholders, for a set amount of time (ex. First 6 – 15 months) upon approval. During the 0% APR offer, interest charges are eliminated for the allotted time frame and resumes once the time lapses.
For instance, if you were approved for a credit card that possesses a 6-month 0%APR offer, then your first 6 months will incur no interest charges. This does not mean you have no payments for 6 months (that’s a different offer entirely), you are still required to pay the minimum balance but you won’t be charged interest. So if you rake up a $1,500 balance, on month seven you will be charged interest on that balance.
While credit cards can both offer 0% introductory APR and then follow up with low interest after the offer ends, it’s usually not the case. For these cards, once the offer expires, average to high interest typically takes its place and can range from 18% on up.
Who a Low-Interest Credit Card is Good For
A low interest credit card can be beneficial to anyone who is unable or chooses to not pay their credit card balance in full each month. Interest is only charged once per month, however the card companies have been known to charge interest to the outstanding balance at day 21. As previously mentioned you should always attempt to avoid interest charges (because who has money to waste?). However, if you are put into a position of using your credit card with no way to cover the total balance within the 21 day grace period, a low interest option is the best option.
A low-interest rate on a credit card is anything below 10%. However, this can be a rarity since the average interest rate rests between 18% and 24%. Your rate will depend on your card company and a variety of other factors like your credit score health.
A good interest rate on a credit card falls between 10% and 17.99%. Anything within this range beats the industry average for credit card holders which currently stands between 18% and 24%.
Credit card holders who plan on holding a balance on their credit card for longer than 21 days should consider a low-interest credit card. In the event that you don’t pay off the balance during this time, you will be charged a generally lower percentage in interest between 10% and 17.99%.
0% APR offers are typically short-term introductory offers that suspend your account’s interest charges for a pre-set amount of time. A 0% APR offer usually lasts up to 15 months and is used as an incentive to attract potential cardholders to sign up.