How You Save With 0% APR & Low Interest Credit Cards

By: asapcc · February 22, 2016

Categories: Credit Card Tips, Credit Guide

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Save With 0% APR & Low Interest Credit CardsThe best way to reduce the cost of borrowing is to lower your interest rate. In regards to credit cards, sometimes a lower rate is as easy as calling your credit card issuer and asking for help. If you can’t get your existing rate lowered, you might consider a new low interest or 0% credit card instead. Even a small drop in your APR can have a huge impact on how much you pay over time.

Saving with a Low Rate

Let’s assume you’ve found a great low interest rate credit card. Your old credit card has an interest rate of 14.99% – but the new offer is only 9.99%. Over the course of a year, you’ll save 5% on interest. Here’s how it adds up:

Assume you have a balance of $5,000 on your credit card:

OLD CREDIT CARD:

$5,000 x 14.99% = $ 749.50 in interest per year

LOW INTEREST CREDIT CARD:

$5,000 x 9.99% = $ 499.50 in interest per year

With a balance of $5000, you could save $250 with a low interest credit card over the course of a year. If your balance was $10,000, you could save twice as much! The extra money you save with a low interest rate credit card could be used to pay down your existing credit card balances, or used to make cash purchases instead and avoid creating even more credit card debt.

* Try our Low Interest Savings Calculator to see how much you could save with a lower rate.

Saving with a 0% APR

Another great money saving option is a 0% APR credit card. They have become increasingly popular in recent years – and for good reason! Not only can you avoid interest charges on new purchases, but you can transfer your existing credit card debt and pay 0% interest on the balance.

Here’s a simple example of how you could save with a 0% APR. Assume you have $5000 in existing credit card debt -or- you plan on making $5000 in purchases with your new card:

REGULAR CREDIT CARD:

$5,000 x 10.99% = $ 549.50 in interest after 1st year

0% APR CREDIT CARD: (12 months)

$5,000 x 0.00% = $ 0.00 in interest after 1st year

In this example, you would save $549.50 in interest after the first year. If your balance was higher, you could save even more! Use the extra money to pay down your existing debt or to avoid new purchases. Just keep in mind that after the intro period ends, interest charges will start to accumulate and you’ll have to pay for the money you borrowed. The ‘free money’ won’t last forever – so don’t overspend and create a balance that you can’t afford.

0% APR vs. Low Interest

Is it better to have a lower interest rate or a longer 0% APR? It’s not always easy to determine the best option. Here’s another example to help you decide which is better:

Assume you have $5000 in existing credit card debt. You can either choose a low APR of 9.99%, or choose a 0% APR for 6 months with an ongoing rate of 12.99%:

LOW INTEREST CREDIT CARD:

$5,000 x 9.99% = $ 499.50 in interest per year

0% APR CREDIT CARD: (6 months)

$5,000 x 0.00% = $ 0.00 in interest for 6 months

$5,000 x 12.99% / 2 = $ 324.75 in interest for 6 months

In this situation, you would save $174.75 with a 0% credit card. Even though the introductory period was only 6 months – and the ongoing APR was higher, you’d still save more with a 0% APR credit card over the first year. But keep in mind, after the first year ends you’ll end up paying more interest with the higher APR.

So unless you plan on paying the balance off completely or switching to another 0% APR offer before the intro period ends, the lower interest rate might be better.

The Best of Both Worlds

Obviously, the best option is to take advantage of both types of offers. Look for a 0% APR credit card with the longest introductory period and the lowest interest rate after the intro period ends. This way, you can avoid interest charges for as long as possible and save the most money on interest over time. Luckily, most low APR credit cards on our site have a 0% introductory APR as well.

* See a complete list of low interest or 0% APR credit cards →

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