How to Get the Best Credit Card Interest Rates

Smiling man at coffee break paying with credit card.
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Credit cards offer so much convenience when making purchases that it’s easy to overlook the interest you’re paying when you carry a balance on a card. However, credit cards are notorious for high interest rates, and the money you pay in interest can put a dent in your budget. Finding low-interest credit cards is important, but that’s not the only thing you can do. Understanding current credit card interest rates helps you minimize the amount of interest you pay to the credit card company.

Factors Influencing Your Credit Card Rate

Credit card companies offer customers a range of interest rates that can vary based on a number of factors. Your credit score is typically the first thing credit card companies look at because it represents how likely you are to repay your debts as agreed. Your credit depends on a range of factors including:

  • Your payment history
  • Debts you owe
  • The length of your credit history
  • New credit you’ve opened
  • Your credit mix

Interest rates also depend on prevailing market interest rates. If you have a card with a variable interest rate, your interest rate can go up and down as the market interest rate changes.

Related: Best Credit Cards for People With Good Credit

How Credit Card Interest Rates Work

Your credit card interest rate is usually expressed as an annual percentage rate, or APR, which measures the amount of interest charged over one year. But, when your interest is calculated, your credit card company will divide the annual rate by 365 and calculate the amount of interest on your balance each day. Usually, credit cards offer a grace period for you to pay, and as long as you do, you won’t be charged any interest. So, if you pay your balance in full each month, you won’t pay any interest, regardless of your interest rate.

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How to Get the Best Credit Card Interest Rates

Shop Around for Competitive Rates

Before you apply for a credit card, set your priorities and do your research first. If you rarely or never carry a balance, look for credit cards that offer substantial rewards, even if they aren’t low-APR credit cards. But, if you do carry a balance, do your research to find credit cards you will qualify for with your credit score and that are recognized as having lower interest rates.

Remember, each time you apply for a credit card, a hard inquiry is added to your credit report. This can reduce your credit score, especially if you have a large number of inquiries in a short period of time.

Ask for a Lower Rate

Though credit card companies don’t have any obligation to lower your interest rate, you might be given a lower interest rate just by asking for it. Especially if you have been a longstanding loyal client, the credit card company might be willing to offer you a reduced rate to keep your business. If the customer service agent can’t lower your rate, ask why, so you can determine what you need to do in the future.

Pay Credit Cards On Time

After you’ve found the best low-interest credit card for you, your work isn’t done. You must keep paying your bills on time to make sure your interest rate stays as low as possible. Follow these tips to avoid credit card late fees. If you are more than 60 days late, your credit card company can raise your credit card interest rate to the penalty interest rate. But, if you make a mistake, there is good news: You can go back to your prior interest rate if you make six consecutive on-time required minimum payments after the date the penalty interest rate goes into effect.

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Use Balance Transfer Offers With Caution

Credit card companies might offer you a low interest rate on balance transfers to entice you to open a new card or transfer your existing balances. These offers for balance transfer credit cards can be very enticing, especially when they offer no interest charges for a period of time. However, make sure you read the fine print. Usually, the new card will charge a fee for the transfer of the balance and the introductory period could end early if you fall behind by more than 60 days. Balance transfers can still save you money, even with extra fees and a limited time at the lower rate, but you need to be aware of these limitations to make the best decision.

Learn More: How Credit Card Balance Transfers Work

The Final Word

Getting the best credit card interest rates is a straight-forward process: Maintain good credit and shop around for low-interest credit cards. You can ask your current credit card provider for a lower rate, and always pay at least the minimum balance each month to keep your rate the same.

Up Next: 10 Best Balance-Transfer Credit Cards


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