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Credit card offers are improving across the board after last year’s sky-rocketing interest rates and tightening terms. However, finding the best credit card deal can still be a challenge. Card issuers have changed rules across the board in response to the more risky economic environment and in an effort to mitigate the effects of the new credit card law.
In short, when applying for a credit card, more than ever it’s important to take a close look at the available credit card offers to avoid nasty surprises down the road. If you’re looking to apply for a low interest credit card, here are 7 tips to make sure you get the best credit card deal.
1. Stay clear of rewards credit cards. If your goal is a low interest credit card on which to carry a balance, avoid rewards credit cards, which generally come with a higher interest rate. Of course, if you plan to pay off the balance each month before the end of the grace period, this is not a concern.
2. Don’t be dazzled by 0 APR intro offers. It’s easy to be tempted to sign up for cards with a 0 percent APR offer on balance transfers or a great bonus sign-up reward. However, once the intro offer expires, you’ll be left holding the bag, if you selected a card with less appealing terms. Avoid surprises down the road by carefully looking over the terms of the credit card offers you are evaluating. Check to see what the interest rate will be once the promotional period expires, and use that as basis for comparison.
3. Look out for “as low as” APR offers. When a card boasts an interest rate introduced by the words: “As low as,” that low interest rate is only available to people with excellent credit. People who apply for a credit card with an “As Low As” rate will have no certainty of what rate they will get on the card, once the application is approved. For example, the Citi Diamond Preferred card advertises an APR currently as low as 12.99 percent, however, that rate is only offered to people with excellent credit. According to the card terms, people with average credit can expect to pay a 16.24 APR on purchases, while people with not so great credit will be saddled with a 20.24 APR.
Therefore, when comparing credit card offers, match up the APRs applicable to your specific credit rating. A few credit card issuers, such as Capital One No Hassle cards, still offer a set APR of 14.99 percent. While it’s not a great rate, at least it gives applicants certainty about the interest rate they will get; however, the card is reserved for people with excellent credit.
4. Is the APR fixed or variable? For the major card issuers like Citibank, American Express, Bank of America, Discover, Chase, and so on, fixed rate cards are almost a thing of the past. However, some credit unions and smaller banks still offer fixed rate low interest cards. Variable rate credit cards are tied to the prime rate, so going for a fixed rate card will give you greater confidence knowing which interest rates you’ll be paying on outstanding credit card balances. This could become particularly important should the prime rate (and the underlying fed funds rate) begin to go up, as many economists predict it will.
5. Check for annual fees. Some cards sporting low interest rates come at a price—an annual fee. When considering such cards, do the math. Is the amount saved through the APR greater than the amount spent on the membership fee? If so, the card pays for itself. If not, look elsewhere.
6. Watch out for sneaky clauses. In the post-CARD Act era, the playing field is changing every day, as card issuers are revamping their terms and conditions to make up for lost income. Some credit card issuers, for example, now include terms that could put your credit card into a 30+ percent APR should you go over the credit limit on the account. As this is an easy slip-up to make, generally speaking, it’s better to look for cards with less onerous terms.
7. Build a long-term relationship. The banks that offer the best low interest credit cards, like e.g. Simmons First National, Orchard Bank, and the credit union Pentagon Federal, generally start new credit cardholders out with a low credit limit and then allow users (who pay their bills on time) to increase the limit over time. With APRs running as low as 7.99 percent variable rate, many consumers might find that taking a long-term perspective could be well worth it.
