Almost everyone has a credit card these days. While some users are straddled with massive debts, others have smooth sailing at optimal convenience. How, you ask? It all lies in what kind of credit card you apply for. Low-interest credit cards offer many people financial freedom at the best rates out there, and we think it is high time you knew about them.
What is a Low-Interest Credit Card?
It is also known as a low APR credit card. APR is an abbreviation for Annual Percentage Rate, used for comparing credit cards and loans by considering the interest rates you have to pay and any fees or additional charges. It is a card that offers low rates on purchases, balance transfers, or both for as long as you have the card. Credit cards typically charge an APPR of at least 20%, but the best low-interest offers go for as little as 5%. It is a cheap avenue to borrow or transfer funds when you need to. Although some low-interest cards have fluctuating rates, most of them have a fixed fee for the card’s life length. You can rest assured that you will pay lower rates than regular credit card owners. You can also avoid switching to new credit cards every few months just to enjoy the optimal introduction deals. Some of them even offer interest-free periods of up to three months before reverting to low-interest rates.
Why Use a Low-Interest Credit Card?
A low-interest credit card gives you a low rate for the rest of your lie. You get a consistent cheap deal and avoid the pressure that comes with paying your balance off in a specific period.
It is easier for you to budget on your funds without applying for numerous cards so you can use the 0% promotional deals. These cards that offer 0% interest rates on balance transfers and purchases seem very tempting, but there is a catch. Be sure to pay off the full amount you have spent before the promotion period ends. Failure to do this will automatically accrue an interest rate of at least 23% APR on your credit card. A low-interest rate credit card offers you certainty with standard rates on all your credit card needs.
Advantages & Disadvantages of Low-Interest Credit Cards
Advantages
- There are no annual fees on low-interest cards because the rate provided usually goes for the card’s entire life. You need not worry about the cost of your balance rising afterward.
- Since you get a permanent rate for your card, it is much easier to budget because there are no surprise charges. You can stick to one card and monitor your spending.
- Low-interest cards do not set ultimatums for you to pay off your debt, so you are free to choose a payment plan that works for you.
Disadvantages
- if you are looking for a card to make a costly purchase or transfer a balance, a 0% rate credit card might be a better deal for you. This strategy only serves as an advantage if you can repay the debt before the promotion period ends. If not, you will be saddled with the high-interest rates you were trying to avoid.
- Some low-interest credit cards have low rates on one product and different rates on everything else. Your card may offer a low-interest rate for purchases but charge higher for cash withdrawals and balance transfers.
- Many low-interest credit cards allow free balance transfers but some charge up to 5% of the amount you are transferring. Being ignorant of these facts can significantly affect your debt and credit score. The interest on cash withdrawals from your card is charged from the date you withdrew. That is the rule irrespective of whether you have paid off your balance for that month or not.
- Some fees accrue if you are late in making your monthly payment or if you miss paying altogether. Your credit card rating will deteriorate, and if the missed payments persist, your lender may take legal action against you.
- The minimum monthly payments you have to make are set low, and as such, it will take you longer to clear your debt. You may want to consider paying more than your minimum amount so you can finish paying off your debt faster.
- Your credit limit will most probably range between a few hundred and a few thousand bucks. This limit may not be sufficient for your needs. However, suppose you go over your limit. In that case, fees will be charged on your balance, which is bound to affect your credit rating negatively.
What To Consider Before Applying For a Low-Interest Card
Your credit score is an excellent determinant of whether your credit card application goes through or not. You can quickly check and fix your credit score online so you can take steps towards improving it. These steps include:
- Making sure that you are registered on the electoral roll.
- Correcting any mistakes on your credit report.
- Waiting at least six months between credit card applications.
- Paying all your bills entirely and on time.
How to Choose the Right Low-Interest Card For You
Before choosing the right credit card provider, you need to consider what you plan on using that card for. Credit cards are comprised of the following transactions:
- Purchases
- Balance transfers from another card
- Money transfers to a current account
- Cash withdrawals
While some low-interest credit cards have a uniform rate for all credit card transactions, others have varying charges. Choose a card that offers the cheapest deals for what you need.
Credit card providers are obliged by the law to provide their advertised rates to at least 51% of their applicants. That leaves a lot of room for discretion on their part. As such, applying for a card and getting accepted doesn’t always mean that you’ll get the rates that enticed you to apply in the first place.
Although that might be the case, your credit profile and overall score play a significant role in what sort of deal your lender offers you.