What to Look Out for in Low Interest Rate Credit
What to Look Out for in Low Interest Rate Credit Cards
When looking for low interest rate credit cards, there are many factors you need to take into consideration in order to ensure you are really getting a great deal. Many people do not realize that low interest credit cards may not really be as low as they think they are. In fact, these supposedly cheap credit cards may be costing your more than you think.
Finance Charge Calculations
So, you think you have found a great credit card with a low interest rate, right? Well, this might be true, but it may not be as cheap as you think it is. Be sure to read the fine print on the credit card and learn more about how the finance charges are calculated. The traditional method for determining finance charges is the Average Daily Balance method. This method best when it comes to saving you money. The Two Cycles Average Daily Balance method, however, can become quite costly if you carry a balance on your card from month to month. And, since you are looking for low interest credit cards, you most likely intend to carry a balance.
With the Two Cycles Average Daily Balance method, finance charges are determined two times during your billing cycle rather than just once. Therefore, you are actually accumulating finance charges twice in your billing cycle. So, while the APR may be low, your finance charges are not because you are paying twice.
Pay Attention to the Grace Period
The grace period is how long you have to pay back what you have borrowed from the credit card before finance charges start adding up. Therefore, the longer the grace period, the less finance charges you have to pay. When looking at low interest rate credit cards, be sure to find out how long your grace period is before you have to start paying. Twenty-day grace periods are the most common. So, if you find a credit card with a low interest rate that provides a grace period for this long, or longer, then you have probably found a good card. If the grace period is shorter than this, continue your search until you find one with an acceptable grace period. Obviously, a low interest rate doesn’t do you a lot of good if the finance charges begin piling up from the instant you make a purchase!
Consider Annual Fees
Some low interest rate credit cards have annual fees. This is the credit card company’s way of compensating for the low interest rate it provides. For the most part, paying annual fees to receive a low interest credit card is not worth it to the cardholder. Shop around some more and see if you can find some cheap credit cards with the same APR that do not include an annual fee. Chances are, you will be able to find one that doesn’t make you pay to be a cardholder.
If you cannot find a low interest credit card with the same low interest rate, then you might want to take a closer look at the card charging an annual fee. In this case, you will have to weigh the annual fee payment against your potential interest rate savings. If the annual fee and interest rates are both low enough, then it might be worth your while to apply for the card. Be sure to provide yourself with an honest assessment of your spending habits and how much money you will be able to send to the credit card each month in order to pay off your debt. The last thing you want to do is just give your money away to a credit card company in the form of an annual fee if it doesn’t ultimately benefit you financially.
Flat Rate Credit Cards
When credit cards were first introduced, they were a pretty simple proposition: use your card for purchases, and be charged a single rate of interest on your unpaid balance.
Then came the rise of the ATM (cash machine), and credit card issuers realised they could lend money by allowing their cards to be used to withdraw cash on account, and could earn more this way by hiding away a higher interest rate for cash withdrawals in the credit agreement small print.
Next came the balance transfer offer, with either long term low rates or an introductory 0% deal, closely followed by introductory deals on purchases too. Not to forget the different interest rate often charged for overseas use.
All these different rates for different kinds of card use can easily become confusing, and survey after survey showed that many credit card users were unaware of how much their card use was actually costing them.
In many respects, this suited the card companies down to the ground as they could advertise eye-catching rates for purchases and balance transfers while quietly imposing more lucrative charges on other kinds of card use.
Amidst all the confusion though, some card issuers spotted a gap in the market – how about a simple, easily understood credit card with no offers or benefits, just a single low rate charged however the card was used? These cards became known as flat rate cards and their names usually reflected their transparency and ease of understanding, for example Barclaycard with their ‘Simplicity’ card, or the Co-op Bank’s Clear.
Whether you’re using one of these cards for spending, transferring a balance, or even withdrawing cash from an ATM, you’ll always be charged a single rate. And what’s more, most cards can offer a great low APR as the issuers aren’t having to fund expensive introductory deals or cashback schemes.
So is a flat rate credit card for you? The benefits are obvious – it’s easier to understand how much your card use is costing you, and you’ll also usually get a great rate.
If you have a large balance to transfer, it might be more sensible to go for a card with traditional 0% introductory offer or one that features a low rate fixed for the life of the transfer.
Likewise, if you use your card for purchases a lot but usually clear your balance every month then the interest rate doesn’t really matter to you, and you may prefer a card with a cashback or rewards scheme.
If however, like most of us, you use your card for purchases and cash withdrawals while carrying a balance from month to month, then a flat rate card could save you a lot of interest.
Fixed Rate Vs. Variable Rate Credit Cards
Although it is mostly industry practice to charge a variable rate of interest on outstanding credit balances at a certain percentage rate above Prime Lending Rate, it is possible, these days, to obtain a fixed rate credit card. So, when would you want to apply for a fixed rate credit card over a variable rate credit card?
The answer to this may not actually sound as simply as you may think. Two factor need to be borne in mind: first, what is the Prime Lending Rate at the moment; and second, what are the chances of the percentage rate plus Prime Lending Rate going above the fixed rate?
If you feel that borrowing rates are cheap at the moment and that it is unlikely that Prime Lending Rate is going to go up in the near future, then in all likelihood having the variable rate credit card is going to be more of a benefit to you than having a fixed rate credit card. However, if the opposite is true, and you believe that there is a good chance that Prime Lending Rate is going to up in the near future, there may be a very good reason for you to want to lock-in your interest rate at the current fixed rate being offered by the card provider.
One exception to the fixed rate vs. variable rate credit cards debate comes into play if you can manage to obtain a fixed rate with a card provider on the transfer of your credit card balance to a new card provider. In this circumstance it could prove to be a very useful money saving policy to agree to the fixed rate for the initial 6 or more month period as, traditionally, fixed rates for transferring balances are very low. You do, however, need to be extremely careful that any variable rate that comes into play following the fixed rate period is not excessive.
Alternatively, you need to ensure (a) that you have made as much of a repayment as is possible during your fixed rate term that you only have a minimum outstanding balance on the day the balance transfers over to a variable rate; or (b) you have the option of transferring the credit card balance outstanding to another new card provider who is also offering a very low fixed rate of interest.
In any case, these days the debate over fixed rate vs. variable rate credit cards is certainly more interesting than was ever the case previously!
Everything About 0% Intro Rate Credit Cards
Tired of reading review after review about 0% APR intro rate credit cards? Having no luck when it comes to finding an all-in-one-review about 0% APR intro rate credit cards? Confused with what youve read so far about 0% APR intro rate credit cards because everything seems to be contradictory? Well, look no more because this article is indeed what youre looking for.
In here, youll learn everything you want to know about 0% APR intro rate credit cards. In this article, you may also discover more than you bargained about 0% APR intro rate credit cards in a good way, of course. Ready for Lesson Number One about 0% APR intro rate credit cards? Well, here goes.
Its True Yes, 0% APR intro rate credit cards do exist and if we have our way about it, youll be one of the lucky people to qualify for a 0% APR intro rate credit cards.
The Application Process Applying for any credit card, whether its for 0% APR intro rate credit cards or for credit cards offering reward points is always a tad difficult so dont expect overnight success, especially since youre angling for 0% APR intro rates.
The application process for a 0% APR intro rate credit card starts with submitting the necessary documents this is SOP for all credit card applications that would substantiate your contact details and give them an overview about your present financial status. Upon submission of the usual documents, depending on your income level and credit reputation, you may be contacted by the credit company and asked to submit additional documents.
The Qualifications for 0% APR intro rate credit cards Basically, if you want to have 0% APR intro rate, you must have a squeaky clean credit reputation. That means having a reputation of paying debts promptly, not owing too much from the bank, not having high balances on your other credit cards, not having too much mortgages under your name and not having so many people requiring a credit check on you.
If youre not sure whether you qualify for a 0% APR intro rate credit card, simply approach the nearest credit bureau and request for a copy of your credit report. The details in your credit report can easily tell you if youve a good shot of owning a 0% APR intro rate credit card or not. People with FICO scores equal to 650 or more are more or less guaranteed of having their application approved.
