Why Budget-Minded Minimalists Prefer Low-Interest Credit Cards

If you’re someone who values simplicity and prioritizes your financial well-being, you probably like to streamline costs as much as possible, cutting out as many unnecessary expenses as you can. That might mean anything from living in a less expensive home with fewer possessions to rigorously paring down your budget to just the essentials and a few select nice-to-haves. It might also mean taking advantage of lower-cost financial products, like low-interest credit cards.

Keep reading to learn how a low-interest credit card can help support a more minimalist, budget-minded lifestyle.

You want lower interest payments

When you carry a balance on a credit card, you owe interest. The higher your interest rate, the more you pay. If you typically carry a balance month to month, a credit card with a permanent low interest rate might help you save.

For example, if you carry a $3,000 balance on a low-interest card with a 13% APR over the course of a year, you’d pay $390 in interest. A standard credit card with a 21% APR would cost you $630 per year in interest — a difference of $240 per year. 

You need to make a large purchase

You might consider a low-interest credit card if you have a large purchase coming up that will take months to pay off. A lower-rate card can help to minimize your interest payments. 

To prevent taking on too much debt, make sure you have a plan for paying off your purchase. Ideally, you want to pay more than the minimum to reduce your balance quickly. Also, try to avoid adding new purchases while you focus on paying off your card. 

You want to pay down your balance more quickly

If you’ve accumulated a substantial credit card balance that you want to pay off more quickly, you may be able to transfer it to a credit card with a low or 0% introductory interest rate. By transferring your balance onto a lower-interest card, you can give yourself some breathing room and a chance to minimize or eliminate interest payments during the promotional period.

While you might be inclined to close your old cards in the pursuit of minimalism, consider keeping them open but using them very sparingly. Keeping old cards open raises your available credit, which is good for your credit score. Just be sure not to start spending more than you were before.

Considerations for a credit card balance transfer

Before choosing a credit card for a balance transfer, there are some important factors to consider, including: 

• Your credit score: Your credit score helps to determine the interest rate and terms you qualify for. A good credit score will help you receive the best terms, such as a 0% introductory rate and a larger credit limit. 
• Balance transfer fee: Most issuers charge a balance transfer fee that ranges from 1% to 5% of the amount you transfer for promotional offers. (In Quebec, there’s no balance transfer fee.)
• Promo and standard interest rate: Balance transfer promotions often feature introductory rates that are very low or 0%. Once the promotional period is over, your interest rate will increase to the standard balance transfer rate. Make sure you’re aware of both rates and what they apply to — transferred balances, new purchases, or both. 
• Length of promotional offer: Ideally, you want to find a balance transfer offer with the longest promotional term since this will increase the time you have to pay your debt at a low or 0% interest rate. Typically, promotional offers range from six to 36 months. 
• How much you need to transfer: Consider how much you want to transfer and if the credit limit on the new credit card is large enough. If not, you’ll need to prioritize which balances you want to transfer.

You want a secondary card for emergencies

If you already have a credit card that you pay off every month, you might consider a low-interest card as backup for emergency expenses that you might need to pay off over time. 

A low-interest card can help to keep the cost of borrowing down if you have to carry a balance after an unexpected purchase. Knowing your backup card won’t accumulate as much interest as a standard-rate card can also help to provide peace of mind.

Low-interest credit cards can help you budget wisely

For the budget-minded minimalist, keeping borrowing costs low is essential — whether it’s through low-interest credit cards or by choosing smarter lending options. If you’re exploring ways to borrow affordably, you may also find it helpful to understand can you get a home equity loan with bad credit.

By keeping borrowing costs low, it’s easier to withstand an emergency cost or to pay off a large purchase over a few months. If you’ve accumulated a high-interest balance, you may consider transferring your balance to a low-interest credit card to consolidate or streamline your payments. Both options can help you reduce your debt and maintain control over your finances.