As the name suggests, low-interest credit cards have lower interest rates than conventional cards. Typically, the rates on these cards range between 10% and 15%, rates much lower than a travel reward credit card. These cards are ideal if you can not always pay the full amount of your monthly balance. Below, we evaluate the advantages and disadvantages associated with low-interest credit cards:
Save on your interest charges
No doubt the biggest benefit of a low interest rate card is the money you will save on your monthly interest charges. If you are someone who tends to carry a previous month’s balance on your credit card, it is necessary that you consider a low interest rate credit card. Many credit cards have an interest rate that goes up to 30%. If you compare this to a low interest rate credit card with a 15% interest rate, your monthly payments will be halved. This can save you a lot, one of the biggest benefits of a low interest credit card.
Lower annual fee
Low interest credit cards tend to have minimal annual fees. Depending on the card you choose, you can expect an annual fee between $ 0 and $ 30. This is very advantageous compared to an annual fee of $ 120 or $ 150 of a reward credit card.
Helps you repay the current debt on your credit card
If your credit card debt is high, we typically recommend that you use a balance transfer credit card. Balance transfer credit cards are definitely the best option to pay off a debt accumulated on a credit card. They offer a low interest rate (or even a 0% interest rate) on all balance transfers during an introductory period. If you can use your balance transfer credit card responsibly in addition to paying off your debt during the promotional period, this is the best option for you.
Balance transfer credit cards are a temporary solution. They provide a low interest rate on all balance transfers during the first few months. Often the interest rate rises to a normal interest rate of around 20%. If you can not settle your accumulated debt during the introductory period, you are better off considering a longer term option.
Low interest credit cards offer an alternative. The interest rates on these cards do not have a deadline. So you can transfer your credit card debt to a low low interest rate card and you will save on high interest payments. Some cards even offer an early balance transfer option followed by a low interest rate. This is the perfect opportunity to start paying off the debt on your current credit card and avoid accumulating more debt caused by high interest payments.
The big disadvantage with a low interest credit card is that it does not provide you with the benefits or rewards you would get with a reward card. Usually, it is impossible to accumulate rewards on your expenses. And your benefits (such as travel and purchase insurance) are very limited.
The low interest rate trap
If you get a low interest rate credit card, do not be too comfortable. Sometimes you can fall into the trap where you see that you have a low interest rate, you will underestimate the pressure to pay off your credit card debt. Having a low interest rate does not mean you can accumulate debt by forgetting to pay your monthly balance. You must always make an effort to pay as much as you can. You have to see a low interest rate credit card as an opportunity to pay off your current credit card and not the time to accumulate more debt.
Balance transfers often come with fees
Low interest credit cards are a great way to start paying off your current debt. So, this is a step that precedes a balance transfer (to transfer other credit card debt to your low interest rate card). But be aware that these credit cards will charge you a fee on all balance transfers.
Say no to the substantive advances
Low interest rate credit cards have very high interest rates for cash advances. We do not recommend making cash advances with your low-interest credit card. However, some of these cards do not have this problem. Just be sure to shop around to find a card that is good for you if you decide that the cash advance feature is important to you.