Credit cards have a number of useful purposes. Whether you’re looking to make a large purchase and want to spread the cost over a number of months, or you want to consolidate multiple balances on to a single card – you’ll want to obtain a credit card with the lowest possible interest rate.
With that being said – depending on your individual circumstances, you might be able to obtain a credit card that comes with a 0% interest introductory period. If you’re really shrewd, you can simply move from card-to-card to ensure that you always avoid paying interest on your purchases.
If this sounds like something that interests you, be sure to read our comprehensive guide on the Best Low Interest Credit Cards in 2019. Not only do we list the top 5 low interest cards, but we also provide a detailed explanation as to how you can ensure you NEVER pay interest!
What is a low interest credit card?
The term ‘Low Interest Credit Card’ is a broad one. As such, it’s well worth taking a quick look at what credit card companies typically charge in the US. At the time of writing, US consumers pay an average APR rate of between 16.94% to 23.94%. The specific rate will, of course, depend on your credit profile. Nevertheless, if you are able to obtain a credit card with an APR interest rate that falls below this threshold – we would typically define this as a low interest credit card.
However, as we briefly noted earlier, a number of credit card companies now offer an introductory period that comes with a 0% interest rate on purchases, balance transfers, or both. The introductory period will typically last for at least 12 months, although some cards extend this to more than 21 months. This means that effectively, you have the chance to switch credit cards when you are approaching the end of the introductory period, subsequently ensuring that you always remain on a 0% interest plan.
How can I always avoid paying interest?
Making purchases on your credit card at an APR rate of 0% is significantly more beneficial for you than simply obtaining a credit card with a below-average APR rate that you remain on long-term. The process does require you follow some simple steps, although it is well worth considering if you want to avoid paying interest. Here’s what you need to do.
Step 1: Obtain a credit card with a 0% introductory offer
First and foremost, you need to obtain a new credit card that comes with a 0% APR offer. If you currently have outstanding balances on other credit cards, then you’ll want to ensure that the 0% offer covers balance transfers. If not – and you’re simply looking to buy products and services on your new credit card, then a standard 0% purchase credit card will suffice.
Step 2: Transfer your outstanding balances to your new credit card
As noted above, if you currently have debts on other credit cards, you’ll want to transfer them over with immediate effect. In doing so, you’ll be able to stop paying interest on your other cards. To do this, simply log in to your newly obtained credit card account portal, and enter the details of your other credit cards. This will include the full 16-digit card number, expiry date, and the amounts you have outstanding on the card(s).
Step 3: Always pay your minimum monthly balance
In order to remain on a 0% APR rate for the duration of the credit card’s introductory period, you must ensure that you always meet your minimum monthly payment. The specific amount will vary depending on the credit card provider in question, although this typically amounts to the greater of 1% of your outstanding balance, or $25.
Take note, if you do miss a monthly payment, not only will you lose your 0% introductory offer, but you’ll likely have the missed payment reported to the main three credit agencies. This could hinder your chances of obtaining a new 0% credit card in the future, so do bear this in mind.
Step 4: Get ready to switch at the end of your introductory period
When you are approaching the end of your 0% introductory period, you need to start looking for a new 0% interest deal. You are best off doing this at least one month before the introductory expiry date so that you have enough time to make the switch.
Take a look at the below example.
💳 Let’s say that you currently have $6,000 outstanding on your 0% credit card, which is about to pass its 14 month introductory period.
💳 If you remain on the same credit card, you’ll start paying 16% APR on your $6,000 balance.
💳 As you don’t want to pay any interest, you apply for a new 0% credit card that comes with a 16 month introductory period.
💳 Once approved, you transfer the $6,000 to your newly obtained 0% card.
💳 As such, you now get to enjoy a further 16 months without paying any interest!
Criteria used to rank the best credit cards
❓ Whether the card offers a 0% introductory rate
❓ How long the 0% introductory rate lasts for
❓ What the standard APR rate is
❓ Who is eligible for the credit card
❓ Whether the card is best suited for purchases, balance transfers, or both
❓ Whether or not the credit card offers rewards
In terms of defining a low interest credit card, this is typically a card that offers a lower rate than the US average. With US consumers paying an average APR rate of 16.94%-23.94%, anything below this would be defined as low interest.
A low interest rate is a credit card that offers a low, long-term interest rate. Typically, the best low interest cards pay around 14% APR. On the contrary, a 0% interest credit card allows you to avoid paying interest for a set period of time.
Absolutely. The overarching objective for any consumer is to pay the lowest interest rate as possible. By making the switch to a new 0% credit card every time your intro period is about to pass, you can ensure that you never pay interest on your credit card balances!
This depends. Firstly, if you want to obtain a credit card with 0% interest, then you will typically need to have a good or excellent credit rating. If you are looking for a low standard APR rate, then your rate will ultimately depend on your specific credit profile. This is why credit card providers always list their rates as a range, rather than a specific APR rate./toggle]
In the vast majority of cases – and irrespective of the type of credit card product you apply for, the online application process can be completed in a matter of minutes. However, this is on the proviso that the credit card company is able to verify your information automatically. If not, they might ask you to submit some verification documents.
If you are making the most of a 0% credit card, but you miss a payment, then it is all-but-certain that you will lose your 0% rate. Moreover, not only will the missed payment be posted to your credit report, but you might also be charged a late payment fee.