What is a low-interest credit card and how does it work?

Sometimes less is more. And having a credit card with a low interest rate (annual percentage rate, or APR) is a perfect example. 

If you carry a balance on your card each month, you’ll be charged interest on the unpaid portion. And since interest is a key factor in how much you’re charged, finding a low-interest credit card can lessen how much you’ll pay in the long run. Read on to learn more about how low-interest credit cards work and how they can benefit you.

Key takeaways

  • A low-interest credit card is typically one with a rate that’s lower than the national average.

  • Qualifying for a credit card with a low interest rate depends on your credit scores. Generally, good to excellent credit scores get the lowest credit card interest rate offers. 

  • In addition to the interest rate, you may also want to consider annual fees and rewards when choosing the right card for you.

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What is a low-interest credit card?

While there’s no industry standard for what’s considered to be a low interest rate, a credit card is typically considered a low-interest card when its annual percentage rate (APR) falls below the national average. The Federal Reserve determines the national average every quarter.

Your credit card’s interest rate might be higher or lower than the national average for numerous reasons. For example, you may have a lower interest rate if you have great credit scores and a strong credit history. Your interest rate may be higher if you’re building or rebuilding your credit.

How do low-interest credit cards work?

A low-interest credit card doesn’t work any differently than any other credit card, provided you pay off your balance in full every month. If you carry a balance on your card, however, a low-interest card will save you money in the long run since you’ll pay less in interest than you would if your card had a higher APR.

Low-interest card vs. introductory APR

It’s important to note that a low-interest credit card is not the same as a credit card with a low introductory APR. Some credit card issuers offer cards with low—or sometimes no—interest for a limited time as an incentive for opening the account. Once the introductory period is over, you’ll pay the regular interest rate on the balance.

How to get a low-interest credit card

If you’re looking to open a low-interest credit card, the following steps can help you find the right card for your needs and may increase your chances of getting approved:

Get your credit in good shape

Your credit history and credit scores can affect the APR you’re offered. And good to excellent credit scores potentially mean better credit card options with better terms—like lower interest rates. On the flip side, bad credit scores may limit your choices. 

Maintaining or improving your credit score will give you the best chance of being approved for a low-interest card.

Compare offers

When you’re choosing a credit card, you may be tempted to focus solely on APR. But you’ll want to review all the terms and benefits of the card you’re considering to make sure it’s the right one for you. Here are a few things you may want to factor into your decision:

  • Annual fees: A low-interest credit card doesn’t necessarily mean a low annual fee. In some cases, you can have the best of both worlds and find a card with both a low interest rate and a low annual fee—or no annual fee at all.

  • Rewards: Earning rewards like cash back or miles for your purchases may be more important to you than a low APR—especially if you rarely carry a balance on your card.

  • Balance transfer costs: A balance transfer moves the amount you owe on one credit card to a new card. If you transfer your balance to a new card with a lower APR, you can potentially save money on interest. Consider a balance transfer credit card offer that not only has a lower interest rate but also won’t charge you a fee for transferring the balance.

See whether you’re pre-approved

If you’re shopping for a low-interest credit card and want to narrow down your options, it might be helpful to view cards you’ve been pre-approved for. While pre-approval isn’t a guarantee you’ll be approved for a card, it does mean that you’ve met the basic qualifications to be considered for the card.

Low-interest credit cards in a nutshell

Low-interest credit cards may save you money on interest payments if you carry a balance on your credit card. But before applying for a credit card, make sure you know your credit scores and take time to consider your spending habits as well as any annual fees you’ll pay and rewards you may want to earn.

If you’re ready to take the next step, compare credit card offers from Capital One. Or explore credit cards with a low introductory rate to enjoy 0% APR for a limited time. (View important rates and disclosures.)

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