Low Interest Credit Cards
Types of Credit Card interests
When you are quoted an annual percentage rate on a credit card it could be referring to one of 3 things; the purchase rate, the cash advancement rate and the balance transfer rate. Which of these rates are more important to your will depend on your spending habits and credit needs. Purchase rates refer to the interest rate charged on new purchases made on the credit card and can vary from 10% to over 20%. Cash advancement rates are even higher and represent the costs of withdrawing cash from your credit card. Unlike purchase and cash advancement rates, balance transfer rates are not a standard feature on credit cards. They are the rate at which debt transferred from another credit card is charged at and usually ranges from 0% to 6% depending on the length of the balance transfer period.
All about low rate credit cards.
If you are pitched a low rate credit card that feels like it is too good to be true, it usually is. A good purchase rate usually leads to some sort of trade off with other features. You must remember that the interest expense incurred on your credit card is not the only costs associated with holding a credit card and often these are set higher to offset the losses of the lender for offering a lower purchase rate. The other expenses to consider include the annual fees, the exceeded limit fees, and late fees charged on the credit card.
When using low rate credit cards it is crucial not to confuse the interest rates. This may seem obvious and even trivial but the consequences of not understanding what each rate refers to or confusing one for another can be significant. Sometimes you may be quoted a competitive purchase rate but be warned that this may be an introductory offer, which will often revert to the purchase rate after a certain period. This makes knowing the exact terms of the offer vital in planning your spending and payments accordingly in order to avoid excessive interest charges. Similarly balance transfer credit cards usually only offer the special low balance transfer rate for a limited time and this rate only applies to the transferred amount. This means that any new purchases made on the card will be charged interest immediately at the purchase rate and NOT the balance transfer rate.
How to find the best low rate credit card
The best low interest rate credit cards will depend on your specific needs, paying particular attention to the purpose of the card and usage frequency. For instance the low interest credit card you need is likely to be different if you are looking for a relief or emergency credit card rather than a credit card for everyday purchases.
The quality of a low rate credit card should be determined on a relative basis, through a credit cards comparison. One of the biggest tips for conducting a comparison is to ensure you are comparing the same/like features. Despite low rates being high on the priority list, there are many other features that must be compared as well in order to arrive at the best credit card for you. This includes comparing the annual fees and rewards program offered on the card. In anticipation of long term card usage, you should compare the ongoing rate rather than the introductory rate offered. Cards with introductory rates have very attractive short term rates to draw in customers however they later revert to average or higher than average purchases rates. By comparing ongoing purchase rates on credit cards you will have a better indication of your credit card costs in the long run.
Costs and Benefits of Low Interest cards
Benefits: Low interest credit cards are cheap means for every day purchases and are also the cost effective option to controlling your credit card bills. They will often be a no frills card so that you don’t pay for all the fluffy extras you don’t need.
Costs: The good rate of interest often means that you will experience some kind of trade off with other desirable features. For instance you are less likely to be rewarded for every dollar you spend. Also low rate cards are unlikely to be suited for international purchases due to higher international fees and charges.
Published: 3 December 2010