Editorial Policy

6 Tips For Snagging a Low-Interest Credit Card

Eva Norlyk Smith Ph.D

July 17, 2012

When applying for a credit card, it’s easy to get seduced by lofty rewards credit card promises.

But if you ignore the less glamorous aspects of the card, like its interest rate, you could end up paying above 20 percent, should you need to carry a balance.

“If you’re going to carry a balance, it’s definitely worth going the extra mile to find a low-interest credit card that works for you.” says Bruce McClary, media relations director of ClearPoint Credit Counseling Solutions.  “Just make sure there are no annual fees that outweigh the benefits of the low interest rate.”

The time to get a low-interest credit card is long before you need it. With a little planning, you can hunt down a low-interest credit card or even get the interest rate lowered on an existing card.  Here are six tips to get you started.

1. Know where you stand. If you haven’t checked your credit score in a while, do so now. Your credit score will determine not just your chances of getting approved for a credit card, but also the credit limit you will be offered and, often, the interest rate on the card. For most card issuers, a FICO score of 720 and above is needed to qualify for the best offers. With a FICO score of 670 to 719, you may still get approved, but you won’t get the very best rates or highest credit limits.

2. Improve your credit. Unless your credit score is well above 720, focus on improving your credit score before applying for a low-interest card. Start with the basics.

“The first way to improve your credit score is to make payments on time, of course,” says Sandy Shore, spokeswoman at Novadebt, a non-profit credit counseling service. “Second, begin to aggressively pay down balances to lower your credit utilization ratio. If you have a balance on a credit card, you should always pay way more than the minimum.”

3. Look outside the box.  Once you’ve taken time to polish your credit score, it’s time to find the best credit cards to apply for. Don’t assume you’ll qualify for the lowest range on a card’s advertised range of rates.

When it comes to the best low-interest credit cards, the best offers can be found not with the main issuers, but typically with smaller card issuers or credit unions. Many of these feature credit cards that advertise one low rate, so you know what you’re getting.

4. Think local.  A good place to look for low-interest credit card offers is in your own backyard. According to a study by Bankrate.com, the median interest rates on credit union credit cards is 20 percent lower than rates for national bank credit cards.

Use this handy comparison tool from Bankrate to compare credit card rates from a number of the larger credit unions.

5. Use leverage. Don’t forget about another source of low(er)-interest cards — your other credit cards. Call call your current issuer after you’ve found a low-interest card with another issuer. Say that you are thinking about transferring your balance to the new card, but that you’d be willing to stick around if they agree to lower your interest rate.  If your credit is good and you have a solid payment history on the card, the bank may shave off at least a couple of points on your APR to keep your business.

Please note: If you are struggling with credit card debt, this is a process you’re better off undertaking with the help of an experienced credit counselor, who will have a better chance of getting your rates lowered.

6. Be patient. Banks take on a higher risk when issuing low-interest credit cards, and they sometimes counteract that by issuing cards with lower credit limits. So even though you get approved for a low-interest credit card, it may take years to build up to a decent limit.

To speed up the process, use the card regularly and never charge more than you can pay off each month. Many banks will automatically raise your limit over time, but it will help if you call in once a year to request  a credit limit increase.