Low Interest Rate Credit Cards Versus 0% Introductory APR Offers: Which Eliminates Debt Faster?

Those looking for low credit card rates are wary of the too-good-to-be-true offers that end up costing more money than they promise to save. After all, most of us just want a straightforward card with simple rules.

But then along comes a card offering a 0% introductory APR for the first two years. A balance transfer to this card could save hundreds of dollars in interest and help you pay off debt — so what is the credit card company hiding? What happens after the two-year introductory period?

These are questions that ensure you don’t make a counterproductive move when looking to low-interest rate credit cards to pay off debt. Consolidating debt is a good idea, but don’t get caught paying ridiculous fees, wasting the 0% interest period or missing the opportunity for better low fixed interest credit cards.

Balance Transfer Fees and Annual Fees

Just because a card offers a long 0% introductory APR period doesn’t mean the other features of the card are desirable. Many of these cards have annual fees to offset the benefit of saved interest.

A second consideration is a balance transfer fee. This is typically 3 percent of the balance being transferred, so watch out when transferring a large balance. Slate from Chase offers a 0% introductory APR for 15 months with no balance transfer fee in the first 30 days and no annual fee. Take advantage of this and other deals with no balance transfer fees when consolidating debt.

Big Purchase or Consolidating Debt

Perhaps you don’t usually carry a balance, but you see the opportunity to make a big purchase using low interest rate credit cards. A 0% introductory APR offer can essentially serve as an interest-free loan for six months to two years. The problem is that whether you’re using the balance transfer card for making a big purchase or consolidating debt, the introductory period may not be long enough for you to knock out the entire balance in time. That’s why it’s never a good idea to sign up for a 0% introductory APR credit card without having a plan.

The 0% introductory APR period can provide relief from high interest rates and a chance to pay it off, but these good intentions can quickly turn into a further motivation to spend during this period. Card companies count that temptation to increase your balance during this period to beyond what you can fully pay. When making a payment plan, it is easy to forget that any excess spending each month is added to the balance.

Additionally, variable APRs after the introductory term can easily be higher than those on traditional cards. You don’t want to transfer a $10,000 balance from a 14.99% card onto a 0% APR card for six months, pay it down to a $9,000 balance, and then have the card jump to a 21.99% APR. The key to a successful balance transfer is the resolve to pay it off quickly. The resolve to pay it off quickly takes a concrete payment plan.

Low Fixed Interest Credit Cards vs 0% Introductory APR

Those who are tired of dealing with fees and changing rates will like the sound of low fixed interest credit cards for paying off a balance. Although these cards make up only 30 percent of the credit card market, they may come with an average APR of 9.9%. Are these cards better for paying off a large amount of debt?

BalanceTime FrameCardMonthly PaymentTotal Interest Paid
$5,00018 months0% APR 18 month 16.5% regular APR$278$0
$5,00018 months10% fixed APR$300$405
$5,00036 months0% APR 18 month 16.5% regular APR$150$305
$5,00036 months10% fixed APR$165$793
$5,00040 months10% fixed APR$150$889

The chart shows that paying off a reasonable amount of debt is better done with a 0% introductory offer, usually even if the introductory period must be passed to finish the payments. The total amount of interest paid only evens out with each card if debt is chipped away at during a long period, but this strategy results in a high amount of total interest paid for any card.

In the case of consolidating debt, use a balance transfer card with 0% introductory APR and pay off the debt quickly — continuing to transfer balances to new cards with new 0% introductory offers will hurt your credit score.

Paying off a balance quickly will require concentrated effort, but the 0% introductory APR will make that effort worthwhile. These cards still have fees which need attention and credit score requirements, but they can be used effectively to eliminate a large amount of debt.

When to Use Each Type of Card

Low fixed interest credit cards are not worthless. They are more efficiently used in making regular purchases with the goal of paying off the balance each month. If one month is not paid off completely, the low interest rates will ensure an easier recovery than a variable APR card with a higher interest rate. Technically, even a fixed APR can change by 30 days advanced notice in a billing statement from the credit card company, so no rate is untouchable.

The cards with 0% introductory rates may also be used to make regular purchases. The introductory period may effectively act as a forgiveness period. These cards will have higher interest rates later though that will be unforgiving of the bad habits accommodated during the introductory period.

Knowing what situation calls for each type of card will help a credit card shopper make the best decision for his particular goals. The specific goal of beating debt can be greatly helped by a balance transfer credit card with introductory low rates and a determination to use that time with the most effort.

Mac Hildebrand is a writer and credit card expert from CreditCardChaser.com. Follow him on Twitter at @MacHildebrand.


Editorial Note: This content is not provided or commissioned by the bank advertiser. Opinions expressed here are author’s alone, not those of the bank advertiser, and have not been reviewed, approved or otherwise endorsed by the bank advertiser. This site may be compensated through the bank advertiser Affiliate Program.