You can save a lot of money with the help of a low-interest rate credit card. This type of credit is recommended to individuals who have a good credit rating and prefer having a balance from month to month instead of paying it off in full. The interest rate on the credit card stays low, which means that the monthly minimum payment and finance charges are lower compared to cards with higher rates.
What Is a Low-Interest Rate Credit Card?
A low-interest rate credit card is one that offers a lower interest rate compared to the average credit card APR of 18 percent. If you maintain a balance on a low-interest rate credit card, your monthly charges are lower compared to a credit card with a higher interest rate.
Most low-interest rate credit cards provide several interest rates, which are low-interest rate, high-interest rate, and an interest rate that’s somewhere in between. The credit card provider looks at the person’s credit history to find out what rate one is qualified for.
How Much Money Will I Save By Applying for a Low-Interest Rate Credit Card?
A small difference in the interest rate can result to a lot of savings. Take for instance you have an outstanding balance of $2,000 on your credit card, and you need six months to pay it off. When your credit card has an interest rate of 20 percent p.a., you need to pay an interest of $118.30. However, if the credit card interest rate is 12 percent p.a., you will only pay $70.60 of interest within the same six month period. That means you will save $47.70 with the lower interest rate. The larger your balance, the more savings you get.
What You Need to Know Compare Low-Interest Credit Cards
There is a wide variety of low-interest rate credits on the market today. It is important that you choose the right one that will lower your monthly payments. Make sure that you read the terms and conditions of the credit cards to find out the vital product information. There are some factors that you need to compare first so that you can come up with a smart decision later. Below are some of the important factors that you should look at when comparing low-interest credit cards.
- Purchases APR. This is one of the most important factors you need to consider when looking for a low-interest rate credit card. The lower the APR, the better it is for you. If the credit card offers several interest rates, then make sure you have a good credit history. That way you will qualify for the lowest interest rate.
- Annual fee. There are some low-interest credit cards that charge a yearly fee. The good news is there are some credit cards that have no annual fee. This is the best deal because it lowers the cost of owning a credit card, and maintaining a balance. The annual fee can offset the advantage of having a lower interest rate. If you choose a credit card with an annual fee, make sure that the fee is justified with other perks and bonuses.
- Other fees. There are low-interest credit cards that charge other fees for some transactions. For instance, you need to pay a balance transfer fee if you are going to transfer your balance to another. The credit card can also charge a cash advance fee if you get a cash advance. Some credit cards also charge a foreign transaction fee when you use your credit card to make transactions in other currencies. Make sure that the credit card doesn’t charge fees for transactions that you usually make.
- Other perks. A low-interest rate credit card also come with other perks and bonuses, such as earning reward points for every transactions, price protection, car rental insurance, free access to credit score, and a lot more. You should check the perks offered by two similar credit cards so that you can make the right choice.