Lowest interest rate rewards credit cards are the best type of credit cards. Everybody should pay their credit card balance in full each month. You always want to take advantage of rewards credit cards and not the other way around.
But sometimes, you might miss a payment by accident or need more time to pay off your credit card. This is why having a lower interest rate rewards credit card may help.
The APR (interest rate) you pay is highly correlated with your credit score. The higher your credit score, the lower the interest rate. If you have over an 800 credit score, you should get the lowest interest rate for a credit card, which is generally in the 10% – 15% range.
If your credit score is 600 or less, expect to pay over a 25% interest rate. Therefore, the first step to get a lower interest rate credit card is to improve your credit score. Here's how to improve your credit score to 800+.
The Average Credit Card Interest Rate
To know what a good credit card interest rate is, you first must know what the average credit card interest is. For 2019, the average credit card interest rate was about 17%.
For 2020, the average credit card interest rate should decline by 0.5% – 1% as the Federal Reserve cuts rates. Therefore, expect the average credit card interest rate in 2020 to be 16% – 16.5%.
One of the best recommendations I have for those with revolving high interest rate credit card debt is to consolidate your debt with a lower interest rate personal loan.
The spread between the average credit card interest rate and the average personal loan interest rate is the highest it's been in years. As a result, it's a good idea to take advantage of a lower interest rate personal loan to save. The best way to do so is to get real personal loan quotes from Credible, an online lending market place with the best private lenders.
The below chart shows a 7% difference between the average credit card interest rate and the average personal loan interest rate. That's the highest spread in 19 years!
The Best Low Interest Credit Cards
Now that you know how to improve your credit score and consolidate any high interest credit card debt with a personal loan, let's go through the three best rewards credit cards with relatively attractive interest rates.
Financial Samurai has spent dozens of hours vetting the lowest interest rate credit cards that also have the best sign-up bonuses and rewards.
What's great about these three credit cards is that none of them have an annual fee, all of them have a great sign-up bonus, and all of them have great cash back rewards. You can't go wrong with either of them. Many people sign up for all three.
1) Chase Freedom Flex
Features of the Chase Freedom Flex credit card:
- Credit score needed: good to excellent
- Sign up bonus: Earn a generous $200 bonus after you spend $500 on purchases in your first 3 months from account opening.
- High cash back rates on select categories: For example, get 5% cash back on grocery store purchases of up to $12,000 spent in the first year.
- Cash back promotions: 5% cash back on up to $1,500 in purchases in rotating categories each quarter
- 5% cash back on travel purchased in the Chase Ultimate Rewards® portal,
- 3% cash back on eligible dining at restaurants and drugstore purchases.
- 1% unlimited cash back on everything else
- Annual fee: $0
- Intro APR: You get 0% intro APR for 15 months from account opening on purchases.
2) Chase Freedom Unlimited
Features of the Chase Freedom Unlimited credit card:
- Great cash back percentage: Earn unlimited 1.5% cash back on all purchases
- Annual fee: $0
- Sign up bonus: Get a $200 bonus after you spend $500 in the first 3 months
- Bonus cash back categories: 5% cash back on travel purchased in the Chase Ultimate Rewards® portal, 3% cash back dining at restaurants and eligible delivery/takeout, 3% cash back on eligible drugstore purchases.
- Rewards expiration: None as long as your account is open.
- Credit score needed: good to excellent
3) Capital One Quicksilver Cash Rewards
Features of Capital One Quicksilver:
- Credit Score Needed: Good to Excellent
- Welcome Bonus: $200 cash bonus after spending $500 on purchases within three months
- Rewards Rate: Flat-rate 1.5% cash back on all purchases
- No foreign transaction fees
- Annual Fee: $0
Tips For Getting A Credit Card With A Low Interest Rate
1) Apply For A Credit Card with 0% Intro APR
The first is to apply for a credit card with a 0% introductory APR. Most cards offer an introductory interest period for the first 12 – 15 months from account opening.
After the intro period, your APR will rise to its normal variable rate, usually between 14-27%, depending on your score. Make sure you pay your balance in full BEFORE the intro period is over. Otherwise, you will end up paying interest for the entire introductory period.
2) Negotiate Your Current Interest Rate Down
The second way to get a credit card with a low interest rate is to negotiate your current interest rate down. Just give your credit card company a call and ask.
If you've paid on time and have been a good customer for at least six months to a year, chances are high they will lower your APR.
3) Apply For Another Low Interest Credit Card
If one isn't good enough, apply for another. It's worth applying to all three credit cards mentioned in this post. To be strategic, apply to one each month to spread out the credit inquiries.
At the end of the day, the best way to get a low interest rate for your credit card is having a high credit score. You want lots of credit and a low utilization rate.
A Low Interest Rate Credit Card Is Insurance
It's important not to use a low interest rate credit card as a crutch. This means that you're actually paying the interest rate on the card. Even though the interest rate may be low by credit card standards, paying an interest rate above 10% is still considered very high since the 10-year treasury bond yield is under 2% and the Fed Funds rate is at a similar level as well.
Use your low interest rate credit card as insurance, just in case you miss a payment or need some extra time. You should take advantage of credit cards with their great cash back rewards offers and wonderful sign up bonuses. That's free money.
Here are the best three again:
- Chase Freedom Flex
- Chase Freedom Unlimited
- Capital One Quicksilver Cash Rewards
Grow Your Wealth With Free Tools
Responsible credit card use is great for the convenience and rewards. To help keep easier track of your credit card balances, cash flow, bank accounts, and more sign up for a free account with Personal Capital. Their free and secure online software lets you monitor all of your accounts in one place.
In addition, they have excellent financial tools that help you track your net worth, cash flow, and easily plan for retirement. Check it out for free today.
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