By Keph Senett on May 2, 2022
Estimated reading time: 4 minutes

How to lower your credit card interest rate

By Keph Senett on May 2, 2022
Estimated reading time: 4 minutes

If you find yourself carrying a balance on your credit card—it happens. Here’s how you can pay less in interest charges.

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Photo by Andrea Piacquadio from Pexels

While you should strive to pay your credit card bill in full every time, let’s face it: sometimes life gets in the way. An emergency, an unexpected expense or even lingering holiday debt can throw your best credit card practices into disarray and leave you carrying a balance.

Typical credit cards charge an annual interest rate (AIR) of 19.99% or higher, which is a steep price to pay for a balance carried on a card. And compound interest—interest charged on your interest—can have a snowball effect on your outstanding debt. Here’s how to avoid high interest charges on your credit cards.

Credit card interest: What’s the big deal?

If you never miss a payment or carry a balance on your credit card, the card’s interest rate won’t affect you. But if you occasionally need extra time to pay down your debt, the interest rate on your credit card is a big—and compounding—deal.

To better understand compound interest, let’s look at a simple example. Imagine you owe $10 and your interest rate is 20% per month. After one month, you’d owe $12 ($10 in principle and $2 in interest). The following month, you’d be charged 20% on the total of $12, which would cost you $2.40. That would bring your balance to $14.40. As you can see, the debt adds up fast, which can really hamper your ability to pay it off in a timely fashion.

An easy credit card debt solution: A balance transfer credit card with a low interest rate

There are plenty of books outlining ways to tackle debt, but before you open your reading app, consider this simple tactic: Use a balance transfer credit card with a lower interest rate. For example, the MBNA True Line Mastercard* is offering a promotion for new cardholders: it has a 0% interest rate on balance transfers for 12 months with a 3% transfer fee, and after that, it charges a significantly lower-than-average 12.99% interest on purchases and 17.99% on balance transfers (and 24.99% on cash advances). Let’s take a closer look.

What to look for with a balance transfer credit card

One debt-reduction strategy is the balance transfer, where you move debt (your balance) from a higher-interest credit card to a lower-interest credit card. The terms of a balance transfer vary, so you should consider the interest rate, the timeline and the transaction fee.

The MBNA True Line Mastercard has a balance transfer offer of 0% interest (the rate) for 12 months (the timeline) with a 3% transaction fee (minimum $7.50). This means that when you move your balance to the True Line, you’ll have a full year to reduce or pay off your debt without interest (and compound interest) getting in the way. The 3% transaction fee is a one-time charge to make the move, and it’s based on the amount you transfer over.

How low interest rates work

When you use a credit card with a low interest rate, your interest charges are reduced—and you will also pay less compound interest in turn.

Here’s the difference in interest payments between a typical card with a 19.99% AIR and one with a 12.99% AIR. For this example, we used a credit card balance of $1,000, including compound interest, and assuming no payments are made and no further charges are added:

Credit card balance	Annual interest rate (AIR)	Daily interest rate	Balance after 1 month	Balance after 12 months	Annual interest payment
$1,000	19.99%	0.055%	$1,016.56	$1,221.21	$221.21
$1,000	12.99%	0.036%	$1,010.73	$1,138.69	$138.69

Difference after one year: $82.31

Nobody sets out to rack up credit card debt, but you can make smart choices about how to handle it should you need to. The simplest way? A balance transfer credit card with a low interest rate like the MBNA True Line Mastercard.

MBNA True Line Mastercard

The MBNA True Line Mastercard checks two key boxes for cost-conscious cardholders: it has no annual fee, and its 12.99% interest rate is much lower than that of a typical credit card.

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MBNA True Line Mastercard

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Annual fee: $0

Balance transfer offer: Receive a 0% interest rate for 12 months on balance transfers completed within 90 days. (Offer not available for residents of Quebec.)

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Card details

Interest rates	12.99% on purchases, 24.99% on cash advances, 17.99% on balance transfers
Income required	None specified
Credit score	660 or higher

This article is sponsored.

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