With very few exceptions, most credit card companies offer a range of interest rates. Of course, the advertised interest rate is always the lowest. And, just like on applications for 0% APR credit cards that offer no interest for up to 12 months, but might only give you that rate for 6 months, this important detail is often hidden on a terms and conditions page linked to the application.
While touting a very low rate that most applicants will not qualify for isn't commendable, the fact that credit card companies offer multiple interest rates makes it easier for them to approve customers who might not qualify if they simply offered one rate. In a way, this practice is beneficial for consumers, as it allows banks to approve more applicants. Unfortunately, most credit card companies that provide multiple interest rates use a tiered rate structure in which a few credit score points can lead to a four or five percent difference in interest rates. Here is a prime example:
Tiered Interest Rate Example: Your APR for purchases will be 12.99% for Elite Pricing or 17.99% for Premium Pricing or 22.99% from account opening for Standard Pricing. Your APRs will be based on your creditworthiness. These APRs will vary with the market based on the Prime Rate.
As you can see in this example, if you don't qualify for elite pricing, even if its a matter of 2 points on your credit score, your interest rate will be 5 percentage points higher. And if you fail to qualify for Premium Pricing because of a few credit score points, you're looking at an interest rate that is another five points higher-and nearly double the lowest advertised rate.
Another, fairer type of pricing credit card interest rates is what I call a range offer. Here's a good example of range based interest rate pricing, which is used by Discover Card.
Range Based Interest Rate Example: Annual Percentage Rate (APR) will be 0.0% for 6 months from the date of account opening;* then the standard APR, a rate between 12.99% variable and 20.99% variable.
As you can see, there are no broad interest rate tiers here. Depending on your credit worthiness, when you apply for a card with this type of pricing, you could get any number of APRs. If you fail to qualify for the absolute lowest rate, you could get one that is a few tenths of a percent higher. Of course, if you just barely qualify, you're interest rate could be as high as 20.99%. But with this type of credit card offer, it is unlikely that you will be penalized by five interest rate percentage points just for having a credit score that is two points lower than what might qualify you for the lowest rate.
As you can see, getting a low interest rate credit card depends on how the credit card determines interest rates as well as your credit quality. However, if you do not have immaculate credit, credit cards that offer range based interest rates could help you get the lowest rate possible for your credit type.
For more information on or to apply for a credit card online, please see the low interest credit card section of CardWisdom.
