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The average credit card annual percentage rate (APR) as of early 2026 is around 21%, according to the Federal Reserve. It’s no wonder that savvy cardholders are looking for ways to reduce the cost of using a card. Some ways consumers achieve this are through a cash-back rewards credit card or a low-interest credit card.
The distinction between a cash-back vs. low-interest credit card is that cash-back cards help you earn a small percentage of your spending back. Conversely, a low-interest credit card tends to charge less interest each month than a high-interest card, which is helpful for cardholders who roll their balance into the next month.
Key Points
• Many cardholders look to reduce credit card costs by using a cash-back or low-interest credit card.
• Cash-back credit cards offer a small percentage of cash back for every eligible purchase you make with your card.
• Low-interest credit cards have a lower interest rate than high-interest cards, which means you’ll pay less if you carry a balance.
• A cash-back card may be best if you have a high monthly spend and typically pay off your balance at the end of each month, while a low-interest card may be more suitable if you often roll your balance into the next month.
• To choose the most suitable card for you, consider your average monthly spending, whether you’ll carry a monthly balance, and the annual fees and interest rates for each card.
What Are Cash-Back Credit Cards?
Credit cards that offer cash-back rewards are designed as an incentive to encourage spending on the card. For every eligible purchase you charge to your card, you’ll receive a small percentage of cash back. Some cards offer 1% cash back, while others offer as much as 6% or more, depending on the program’s rules. You might earn a flat rate across all purchases, or you might earn more in certain spending categories, such as groceries or gas.
You then can redeem your earned cash-back rewards. Redemption options may include a cash payment or a statement credit toward your next bill, or you may be able to redeem the rewards for travel, merchandise, gift cards, and more.
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What Are Low-Interest Credit Cards?
Low-interest credit cards incur a lower borrowing cost compared to high-interest credit cards. A credit card that charges low interest allows you to pay less for using the card if you carry a balance. This card feature is beneficial for cardholders who repay their monthly balance in increments over time instead of in full.
The interest rate you qualify for highly depends on your creditworthiness, including your past borrowing habits and credit score. Consumers with strong credit might qualify for promotional no-interest credit cards that charge 0% APR for a limited period. After this period is over, the card’s interest rate increases, based on the cardholder’s credit and qualifications. As such, there are both advantages and disadvantages of no-interest credit cards.
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Differences Between Cash-Back and Low-Interest Credit Cards
Below are the key differences between low-interest vs. cash-back credit cards to keep in mind when choosing a card:
| Cash-Back Credit Cards | Low-Interest Credit Cards |
|---|---|
| Cash-back rewards offer an incentive for spending. | You’ll generally need good credit to qualify. |
| Cash-back rates vary by issuer. | Low- or no-interest credit cards vary by issuer. |
| Savings may be negated when a balance carries over. | The lowest APR offers are reserved for those with strong credit. |
| You may be able to choose a card that offers enhanced cash-back rewards in key spending categories. | Some cards offer a promotional 0% APR for a limited period, which can be especially beneficial to those carrying a balance. |
| Perks may be inconsequential unless monthly balances are paid in full. | The borrowing cost is lowered for carried-over balances. |
Factors to Consider When Choosing Between Rates and Rewards
Your unique financial situation, borrowing habits, and the features and benefits of a particular card are what you should consider when comparing your options.
Average Balance You’ll Be Carrying Monthly
How credit cards work is that they give you purchasing power up to a limited amount, even when you don’t have the cash upfront. You can choose to repay the debt in one lump payment by your statement due date, which allows you to avoid paying interest charges. Alternatively, you can make installment payments over multiple months, in which case you’ll accrue interest charges.
Not carrying a monthly balance is one of the common credit card rules to try to stick to, but it’s not always possible. For example, you might have had an unexpected injury that resulted in a medical bill that exceeded your cash savings. In this scenario, putting some of that cost on your credit card and making small, monthly payments to repay it might be necessary.
If you don’t have sufficient cash savings or income to confidently repay your monthly balance in full each month, a low-interest card might offer an advantage over a cash-back card.
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Your Average Monthly Spending
Look back at your monthly expenses and think about the total amount you’ll likely put on your credit card each month. For example, you might use a credit card to cover everyday expenses, such as dining, groceries, and gas. Cardholders who rack up high monthly balances can benefit from a cash-back credit card that offers money back on purchases they’re already making.
The caveat, however, is if you charge more expenses to your card than you can realistically pay back in full by the statement due date. If you roll over any portion of your outstanding balance into the next month, you’ll get charged interest on that amount, which cancels out any cash-back rewards you may have earned.
Recommended: Tips for Using a Credit Card Responsibly
Annual Fees
Some cards, particularly rewards cards that extend high-value benefits and incentives, might charge an annual fee., For example, a cash-back card might offer an annual $300 travel credit and 5% cash back on flight purchases but charge an annual fee of $550.
If you don’t travel enough to use up the credits and earn more cash back than the annual fee costs, that card might not be the best fit for your lifestyle. You’ll need to assess the total potential dollar value that a card’s benefits, credits, and other incentives offer in comparison to the upfront cost of the card’s annual fee.
Interest Rate Difference Between Cards
Although all credit card issuers check your credit to determine your interest rate, each card company has its own underwriting criteria. You might receive an interest rate offer of 19.99% APR for one card and an offer from another card issuer of 22.99% APR, for example. To gauge interest rates, it can be helpful to look at the current average credit card interest rates for a point of comparison.
Regardless of whether you end up with a cash-back credit card vs. low-interest credit card, it’s always a good idea to shop around for the lowest interest rate you can get. That way, if you ever need to carry a balance, you can minimize the amount of interest you end up paying.
Guide to Lowering Your Credit Card Interest Rate
Whether you are shopping around for a new credit card or have an existing card with a high APR, here are some ways to lower your interest rate:
• Contact your card issuer. If you have been a loyal customer and kept your account in good standing, or if you’ve built your credit score since opening your account, your credit card issuer may be willing to reduce your rate.
• Build your credit. Even if you already have good credit, working to build on that success can help you secure the most competitive interest rate in the future. Good borrowing habits, such as making on-time payments and keeping your credit utilization low (below 30% or ideally below 10%), are just some ways you may affect your score.
• Consider a low-interest balance transfer card. If you have a high-interest card with a balance on it, and you have strong credit, a balance transfer card can allow you to move your original balance onto a low-interest card. Before proceeding, always compare the balance transfer fee against your potential savings to confirm that it’s worth it.
Remember, what’s considered a good APR for a credit card is subjective, based on your creditworthiness and other factors. Securing the lowest APR that you qualify for can help you avoid heavy interest charges if you roll over a monthly balance.
The Takeaway
Ultimately, whether you opt for a cash-back credit card or a low-interest card depends on how you plan to use the card and manage debt, as well as what kinds of perks and features matter most to you. If you often carry a balance, for instance, a low-interest card could be valuable. If you tend to follow the important rule of paying off your card balance in full every month, then the interest rate may not matter as much, but cash back could be a benefit you appreciate.
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FAQ
When is a lower annual interest rate better than a low annual fee?
A lower APR is better if you typically carry a balance from one billing cycle to the next. When you roll over a balance, old and new balances accrue daily interest charges that can cost you more money out of pocket. A low annual fee is something to look for when you’re using a card to earn incentives, such as credit card rewards.
Are there credit cards with low interest and cash back?
Yes, there are credit card options that offer a low interest rate to qualified applicants, as well as cash-back rewards. However, you’ll generally need to have good credit in order to qualify for the most competitive rates offered by low-interest rewards credit cards.
How can I choose between low APR and rewards?
Consider your credit history and score to determine whether you meet the minimum qualifications for a credit card’s lowest APR. Also, examine your general credit card habits, including whether you often roll over a balance and what your monthly spending habits are like. Compare those details against the costs of carrying a card, such as annual fees and the APR you’re offered.
Is it better to find a credit card with low or high interest?
Finding a credit card that offers a low interest rate is usually the better move. The lower your APR, the less you’ll pay for borrowing on credit if you decide to carry a balance month to month.
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SoFi Credit Cards are issued by SoFi Bank, N.A. pursuant to license by Mastercard® International Incorporated and can be used everywhere Mastercard is accepted. Mastercard is a registered trademark, and the circles design is a trademark of Mastercard International Incorporated.
Disclaimer: Many factors affect your credit scores and the interest rates you may receive. SoFi is not a Credit Repair Organization as defined under federal or state law, including the Credit Repair Organizations Act. SoFi does not provide “credit repair” services or advice or assistance regarding “rebuilding” or “improving” your credit record, credit history, or credit rating. For details, see the FTC’s website .
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