Banks and other financial institutions issuing credit cards have offered consumers with a bewildering array of card deals, including cards with rewards programs and low interest credit cards. With the variety of credit card offers to choose from, it only means that you can have at least one card in your wallet. To avoid racking up credit card debts you can make low rate cards work to your advantage.
Before you can make these cards work for you, it is important to know the two types of low interest credit cards. These cards can have a continuing low interest, or offer low honeymoon rates which eventually revert to a higher rate after the expiration of the introductory period.
Cards with continuing low interest rate
Credit cards that attract continuing low interest keep their low-interest offers for as long as you have the card. These types of low interest credit cards work if you are revolver, that is, you pay only a portion of your account each month and revolve the rest of the credit card debt balance from month to month. You can find a number of these low interest credit cards with interest rates as much as 9 per cent less than the standard rates. If you carry an average balance of $2,000 in your account, the interest difference can mean a savings of at least $180 over one year.
These low interest credit cards often levy higher fees, however. They may charge higher annual fees, and ATM withdrawal fees. As with most other types of cards, the cost of cash advances are far higher than on purchases and should generally be avoided. These cards do not allow you to earn rewards points.
But you can address this drawback by getting another credit card with rewards programs. A low interest credit card can be useful when buying large items that you can’t afford to pay off instantly but want to pay off installments over a few months. The card with rewards program can be utilised to pay for goods and services which you can afford to pay off in full every month.
Cards offering low honeymoon interest rate
These types of low interest credit card deals are particularly useful if you transfer your balances from your other existing credit cards. The low, or even zero, rates are usually valid for a certain period, say six months. You have to watch out after this period because interest will revert to the standard, higher rate.
To save more money using these low interest credit cards, strive to clear the transferred balance of credit card debt within the introductory period. The jump between the intro rate of 0% APR and the standard rate of 16% is massive. You could save around $160 on a $2,000 balance over six months.
Use these types of low interest credit cards as your means to punch away at credit card debt; never use them to make more purchases. Only transferred balances attract the low rate, whilst new purchases attract the standard rate. Crucial to know is that any repayments will be applied to the transferred low interest balance first. This means the more expensive credit card debt for new purchases will get paid off last – and continuing to be charged higher rates all the while.
Which ever type of low interest rate card you choose, keep in mind the following. If you only pay the minimum due you could be paying off your debts for years so make sure you pay above the minimum due each month.
This article is bt Richard Greenwood from click4credit.com.au, an Australian credit card comparison site featuring leading issuers and cards including Aussie Mastercard.
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