The Best Low Interest Rate Credit Cards
Updated May 2012
The only thing more challenging than managing credit card debt is getting out of it. To accomplish this important goal you need a sound budget, plenty of discipline, and a credit card with the lowest possible interest rate. (See also: The Best 0% Balance Transfer Cards)
How to Find the Lowest Interest Rates
Every bank is legally required to clearly disclose each card's Annual Percentage Rate, or APR. This is the rate you will see in the black and white box when you click on the “terms and conditions” link. While you might think these disclosures make choosing the lowest APR an easy task, it is not that simple. Most banks will disclose a range of possible rates, with each applicant being offered a particular APR according to his or her credit rating. Therefore, the lowest rates available will be granted only to those applicants with the highest credit scores, with all other cardholders receiving higher rates.
Another important aspect of a credit card interest rate is that nearly all of them will have a variable rate. The good news is that the CARD Act of 2009 prevents banks from arbitrarily raising their rates on cardholders in good standing. What you will find is that nearly every card on the market will offer a variable APR that is based on the Prime Rate. This rate, determined in part by the Federal Government, has stood at a record low of 3.25% since December of 2008. Nevertheless, the variable interest rates quoted by the credit card issuers will rise when the Prime Rate does. For example, if the Prime were to rise to 8.25%, as it did in June of 2006, cardholders would see their interest rate rise by 5% from the current rates (as of this writing in December of 2011).
Finally, the best interest rates offered for a particular card can vary based on the link you use to apply for it. For example, applications for Chase Freedom card mentioned below can be found in many different places, with a higher interest rate depending on the amount of initial cash back offered. I have even seen Capital One present different rates for the same card depending on which browser I used!
The Five Lowest APR Cards on the Market
These cards currently have the lowest interest rates.
1. Simmons First Visa Platinum
This card has an unbelievably low rate equal to the Prime Rate plus 4%. Better still, this is the rare card that offers applicants a single possible APR rather than a range of rates. So if your application is approved, you will receive this great rate. Needless to say, applicants must have excellent credit in order to be approved. Balance transfers are also subject to the purchase APR, plus a 3% balance transfer fee. This card has no annual fee and a 2% foreign transaction fee.
2. Iberia Bank Visa Classic
This is another lesser-known institution with spectacularly low rates. Their Visa Classic has an APR equal to the Prime Rate plus 4%, matching the Simmons First Visa Platinum. Unlike Simmons, customers without excellent credit may receive an interest rate equal to the Prime Rate plus 7% or even 10%. Other than that, the terms are similar — there is no annual fee for this card, and there is a 2% foreign transaction fee.
3. PenFed Promise Visa
PenFed is not a bank, it is the Pentagon Federal Credit Union. Membership is free to qualified applicants, which includes many military and government workers as well as members of their extended family and households. Those who don’t qualify on this basis can join after making a one-time contribution of $15 to a military charity. Once a member, you can apply for their Promise Visa card, which offers a fixed APR of 7.49% for three years, followed by standard APR equal to the Prime Rate plus 7.74%. As if that wasn’t good enough, this card has virtually no fees. That means no annual fees, balance transfer fees, cash advance fees, or foreign transaction fees. There are also no penalty fees for late payments, exceeding your credit limit, or having a payment returned. Missing a payment will hurt your credit score, but it won’t even result in a higher interest rate.
4. Chase Freedom
This is the card that is offered in several different versions. If you apply for the offer that has only $100 cash back, those with excellent credit can receive an interest rate of 12.99% to 22.99% variable. But there are many other reasons to consider this product. This offer includes a 0% introductory APR for 15 months on purchases and balance transfers. This product is also eligible for Chase’s groundbreaking Blueprint program. This feature allows cardholders to avoid paying interest on the portion of their balance that they pay off each month. It also includes powerful online budgeting and goal setting features. When fully utilized, the Blueprint system can effectively lower the amount of interest paid. Finally, I am reluctant to mention that this card is also a rewards card, since those who carry a balance should always be looking for the card with the lowest APR and should never be tempted to spend more to earn a little cash back.
5. Wells Fargo Platinum Card
Rounding out the top five is a card from the legendary bank that dates back to the Gold Rush days. Their Platinum Visa starts off all new cardholders with a 0% introductory APR for six months on both purchases and balance transfers. The standard APR given to their applicants with excellent credit is equal to the Prime Rate plus 6.9%. Unfortunately, less qualified applicants could receive a standard APR as high as Prime plus 18.9%. There is no annual fee, but there is a balance transfer fee of and a foreign currency conversion fee of 3% each.
Although the best way to use a credit card is to avoid paying interest, most Americans are unable live up to this ideal. If you do have to carry a balance, your primary goal should be finding a card with the lowest interest rate. Doing so will help you to minimize the amount of interest that you owe, making it easier to pay off your credit card debt as soon as possible.