Most credit card companies have low interest credit cards. Usually these will come with a low or no interest rate credit card for six to twelve months. On top of that, these cheap credit cards will go to a high fixed rate or high variable rate card at the end of the free period. These are great cards if you can play the debt off in the specified time; if you can't then they will cost you plenty over the long haul.
They are also good for some purchases. Let's say your washer or dryer goes out, and it will cost more to repair than to replace. You can get this type of credit card to purchase your new washer and or dryer from any store you wish, and then have six months to pay off the $300 - $500 dollars instead of renting or waiting.
With this type of card you will have to be willing to part with it once your time limit has expired, after that the rates are like the junk cards you get in the mail, upwards of 18 per cent interest. A few will say different, and be as low as 10% if you have perfect or close to perfect credit rating. If you have missed or were late in the last year, it could jump as high as 25%.
There are a few people that want to use these cards as account transfer holders. It sounds good to put a 5 to 30 thousand dollar debt on these interest free cards for six months to a year. There are many downfalls to that type of thinking. If you think you are paying way to high of an interest rate now, then if you are a day late with these cards, you will find yourself at 21-25% interest right away. They make their money on you missing a payment or being late with one so they can take away the interest free for the rest of the time period.
This brings us to how they make their money. The card is only interest free as long as you are not late. You can call in and make arrangements on these cards, but what you won't hear is that next month they will charge you interest right away, you broke the agreement with them. So your free card now has a 18 per cent or higher rate the rest of the six months to one year period, making it almost impossible to get a decent rate on a new card.
These cheap credit cards are what I call "throw-a-way" cards. Use them once for a small purchase, then cut-them-up and throw them away. Remember even on your small purchase you cannot really make arrangements or be late.
The key to using these low interest rate credit cards successfully whether for a down payment on a new car or buying a spa is to make sure the payments are within your budget before you actually use it. If there is any reason at all to not be able to make that monthly payment on your low-interest credit card you are out of luck. However if you are one of the lucky few that can make those payments on time for your new purchase, then by all means get the card now and get the things you want. Remember whether it is six months or twelve months will make a huge difference as well as begin able to make your payments. If your credit rating is good, there is no need to go without the things you want right away.
Use the link below to compare different cards that you may want to have. Try not to go overboard; one card at a time should do you well. By getting one card every six months you basically get something above average for yourself or family a couple of times a year.
It can be used for the sake of convenience, for online shopping and the dozen other uses for which it was designed. Or, it can become a means of increasing your debt to absurd levels and cause you to pay painful amounts of unnecessary interest every month.
Debt consolidation is often a option considered by people facing serious credit card debt. And usually there is a stream of offers by companies ready to help them consolidate their debt onto a single credit card.
Normally these offers promise lower interest rates. However, the reality is that low interest rates are usually only a reality for people with excellent credit. The average person who is fighting to get out from under a mountain of debt does not have excellent credit and will likely not qualify.
At times these cards are offered to struggling debtors and it could be a way out. But before accepting a credit card with the goal of consolidating debt there are some things to consider.
Consolidating onto one credit card almost never lowers your overall debt. So you haven't really improved your situation in any way. And interest compounding on such a large balance over a long period of time means higher overall interest paid back in the long run.
The interest rate is one thing to consider. But the length of time you will be paying on the debt is also a factor. A $10,000 debt at 8% will accrue more interest over 5 years than a debt with the same balance at 10% for 2 years so the overall amount you pay back on the debt with lower interest will be a great deal higher.
The culprit is compounding interest. With 8% interest over 5 years compounding interest means in reality your net interest rate paid on the balance above the principle is 21.656%. It would be 10.748% with 10% interest over 10 years.
The 8% and 10% are not the total percentage of interest. This is the annual percentage rate (APR), only the rate for a period of a year.
The benefit of the loan with a lower interest rate and longer term is that your payments are significantly lower, less than half. It may be that your circumstances make a lower payment easier to handle and that may be worth the extra money in the long run. It is easy to find on line calculators to help you amortize loans with different terms to see which is the right fit for your situation.
Both Robert Alan & William Blake are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Robert Alan has sinced written about articles on various topics from Credit Cards, Business Credit Cards and Credit Cards. For more on what to watch for in a low interest credit card, Robert Alan recommends that you visit CreditCardAssist.com. Robert Alan's top article generates over 110000 views. Bookmark Robert Alan to your Favourites.
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