Low Interest Rate Credit Cards

Credit cards are notorious for having high interest rates, mostly due to the fact that servicing, maintaining, and managing accounts are very expensive. However, prime borrowers often have the ability to borrow large amounts of money with low interest rate credit cards, which help to reduce the costly effects of credit card debt.

Low Interest Rates
On a credit card, a low interest rate is considered to be anything from 0-11%, with cards in the 6-10% range being the normal for low interest rate qualifications. At 6-10% per year, a borrower could fund a $10,000 shopping spree, home repair, or a series of expenditures at a cost of less than $1,000 per year in interest.

Low interest rate cards typically provide larger than average credit lines to customers. Since a bank stands to make only a very small amount per card, the bank has an incentive to provide customers with very high credit limits, often in excess of $5,000 or $10,000. The high credit lines also allow the bank to make money on larger shopping trips, as credit card merchant fees make the bank 1-2% in pure profit on each transaction. Thus, a swipe for $100 is an instant revenue source of $1-2 for the credit card company, merchant processor, and banking institution.

Are Low Rates Necessary?
Credit card users often forget that low interest rates only come into effect if you plan to hold a balance on the account. Otherwise, the benefits of a low interest rate will go unnoticed, as no interest is charged to the account at all. If you plan to make monthly payments for your account balance—thus “paying in full” each month—you won’t be charged any interest at all. Customers who pay in full each month pay the same amount of interest whether the account costs 20% per year, or 0% per year. There is no interest charged when you pay in full.

This is why so many credit card customers ultimately go for rewards credit cards with higher interest rates over low interest rate credit cards with no rewards. Obviously there are a few credit cards with rewards and lower interest, but in general, rewards cards tend to have higher interest rates to capitalize on the benefits passed on to the consumer.

Getting Low Interest Rate Cards
Low interest rate credit cards are offered to prime borrowers. To become a prime borrower, you should have years of credit history, excellent repayment abilities, and few bad marks on your credit score.

Additionally, prime borrowers often have very low balances as a percentage of their total credit lines opened. Your credit score necessarily drops as your utilization rises. Thus, to be in the cream of the crop of credit card consumers, you must take a conscience effort to keep your balances low, and your payments on time. Never, ever, allow your utilization to rise above 50% on any one card, and take proactive steps to keep your utilization below 25%, if possible.

You can also turn a high interest rate credit card into a low interest rate credit card by negotiating with the bank. Typically, consumers looking to raise their credit scores and borrowing profiles will call their existing creditors each month to ask for either lower rates (which reduce your interest rate on your card) or a higher credit line (which decreases your total utilization). In general, certain credit card offerings from one company may have minimum and maximum interest rates that vary from their other cards.

Capital One, for example, offers a Platinum card for bad or no credit borrowers, and the interest rates start in the high teens. However, the Venture card from Capital One is a card intended for good credit borrowers, and its interest rate starts at 11% per year, an amount well in line with low interest credit cards from other companies. If you were to negotiate for lower annual percentage rates on a Platinum card, the rate would likely never dip as low as it would on a Venture card. In cases like these you should ask the company about converting one card to another type, which allows you to keep your credit history and ultimately work toward a lower interest rate.