Low Interest Credit Cards
Low interest credit cards when used properly can provide solutions to many of your credit problems.
In today’s tight financial economy it has become more important than ever to learn how to budget and manage our finances properly. Some years ago taking out a low interest credit card wouldn’t have taken a great deal of thought or planning. But now it is more sensible to know exactly what we are signing up for. Another advantage to being more informed about a low interest credit card rate means we can also compare low interest credit cards and compare the various deals on the market to see which offer the most benefits. It’s important to understand how to compare low interest credit cards.
A low interest credit card rate can provide solutions to your credit problems by allowing you to use and make purchases on your card, whilst still giving you the benefit of repayments at a low interest rate.
What benefits can I get from a credit card low interest rate?
- It is less costly to make purchases with a credit card with low interest
- Easier to reduce your credit card debt and make monthly payments with a credit card with low interest
- Less interest to pay when you don’t clear your balance each month with a best low interest credit card
Low interest credit card guide
There is so much information available today regarding credit card deals and offers that often it’s difficult to sift the wheat from the chaff. We have put this guide together to help you through the maze and by reading the information provided you will understand everything you need to know about the best low interest credit cards, and how to compare low interest credit cards, plus low interest credit card balance transfer.
Why do I pay credit card interest?
Credit card interest is what you pay back to the credit card provider for being able to use their credit facilities. This is on top of any payment to reduce your debt. For example when you have a debt of $3,000 on your card, and you don’t pay it in full by the time the monthly statement comes, you will be charged interest. The longer the debt is outstanding the more interest accumulates. The annual percentage rates on a credit card are known as APRs.
When you see p.a. written after a percentage value this means per annum (each year) so if you see 20% p.a. it is implying your credit card balance will accumulate 20% of the card value each year in interest. However, it is very important to know that even though rates are quoted by APR they are in fact calculated daily. To work this out for yourself just divide the APR by 365.
Many credit cards offer interest free days, meaning if you pay for your purchases within the allocated time you don’t pay any interest. But credit cards low interest rates are more suited to the person who can’t meet the 55 interest free days period.
What type of interest will I pay on a low interest card?
- Interest on purchases: Whenever you use your low credit card interest rates card either to pay for goods or a service you will be charged interest.
- Interest on cash advances: Cash advances are when you use your credit card to withdraw money. These type of cash transactions include transferring funds from one account to another and withdrawals from ATMs.
- Special interest: This can be interest charged for a specific transaction such as a balance transfer and can also be a low interest credit card rate.
- Interest on interest: This type of interest is charged to any outstanding debt on your card, which has occurred as a result of any of the three previously mentioned charges, since your last statement period.
How to save money with a low interest card
Less interest is paid on credit purchases with low credit card interest rates. When you use your credit cards low interest rates to make purchases, but can’t pay for them within the interest free period, you will get charged a low rate of interest instead of a high rate, which means a lower repayment. This is a benefit of a credit card low interest rate.
Apply for a 6 months 0% balance transfer card with low interest. This will allow you to transfer an existing debt to a new card with an introductory offer of 0% interest for six months. At the expiration of that period the interest reverts to the normal low interest credit card balance transfer rate.
How much money can be saved with low interest credit card?
This will be dependent on your spending habits and your current debt level on your low credit card interest rates.
Example case scenario: Mark makes a purchase on his credit card for $2,000. He has an interest rate of 10% but repays his purchase after 50 days. If he had taken 12 months to repay he would of been liable to pay back $2,200 (10% of $2,000 = $200)
The daily interest rate in this scenario would be 10 divided by 365 = 0.028%. Given he took 50 days to make the repayment, the interest charged would be 0.028% of ($2,000 x 50 days) = $27.40 interest.
Why are low interest cards better for me?
Some people like to pay their card balance in full each month but others either can’t or choose not to do so. If you are in the latter position a best low interest credit card is definitely your best choice for a credit card. For starters you won’t be penalised with high interest rates when you carry your debt over from month to month. You will find many low rate cards have features that will help you to control your debt. Have a look at a low interest credit card application.
How much interest will I pay on a low interest card?
When you use your low rate interest credit card to make a purchase or pay for a service you are using credit by borrowing money. Each month you will receive a statement, and then have the choice to either pay in full or pay a small amount and carry the debt forward to the following month. There is a standard requirement that you must pay the minimum amount shown on the statement, which usually equates to 2% of the total amount outstanding.
If you don’t pay the amount in full you will be charged interest. The amount of interest varies dependent on your type of card and credit provider. This is why we recommend doing a credit card comparison to get the best deals prior to applying for a credit card with low interest.
Are all transactions equal?
Many people get caught in the trap of thinking that all transactions are treated equally, particularly if they have just read an enticing offer or advertisement. But this is not the case; generally the rate that is being promoted is applied to purchases, but not for other transactions such as cash withdrawals.
These type of transactions generally have a separate rate of their own, and in the case of cash withdrawals usually quite a high one. If you don’t understand the different rates that apply, your low rate interest credit card statement can give you a nasty shock when it arrives.
When you make a cash withdrawal, that isn’t just restricted to getting money out of the ATM. Purchasing travellers cheques and gambling transactions also count as cash withdrawals.
Be careful when using your card overseas, you could find that extra fees are charged. The majority of credit cards will charge a foreign transaction fee when the card is used in another country. This varies but is usually around 2.75% of the transaction.
What should I be comparing on low interest credit cards?
There are a few important things to look for when you compare low interest credit cards:
- Annual Fees
A low annual fee is always good, but not necessarily the most important criteria in your search for the best low interest card. However, if you find two cards with similar low interest rates, then look for which one has the lowest annual fee. - Interest rates
The lowest APR is what you should be looking for when you compare interest rates. You should be taking into account the annual percentage rate, plus interest charges and the annual fee. If you carry your debt balance forward each month, it is more beneficial for you to be looking for the best low interest fixed rate credit card deals. - Introductory offers and rates
Because credit cards providers have become so competitive there are some great deals on best low interest credit cards available on the market if you look round for them. To entice new customers, card providers will offer low introductory rates, or even zero interest rates on a low interest credit cards balance transfer or purchases for limited periods. If the interest on your current debt is getting away from you, doing a low interest credit cards balance transfer or zero interest balance transfer might help you bring it back under control and hep you reduce your debt faster. You should check out a low interest credit card offer. - Rewards points and programs
If you are a big spender with your credit card, then having a card that awards points per dollar spent might be a good choice for you. These points can generally be redeemed for cash, trips or other merchandise. - Hidden charges or fees
Before accepting any low interest rate credit card you should always read the terms and conditions and know exactly what charges or fees will be applied to the card. You can get caught out with all sorts of nasty little surprises if you don’t know what to look out for. One of the most common ones that caught a lot of Australians out was the $2.00 fee for using ATMs.
Many Australians are finding it a struggle to pay off the total amount of their credit card debt each month, which is one of the reasons that this type of low interest credit card offer have become so popular. There is a certain peace of mind in knowing that you are not going to be penalised with a huge amount of interest if you can’t make payment in full on your low interest rate credit card.
How do I compare low interest cards?
These days credit cards come in all flavours, so making the right choice of low interest credit card offer can be confusing at the best of times. If you want to save money you can’t go past a credit card low interest rate, but the benefits you gain are solely dependent on what type of spender you are. The key to getting the right card is being able to match it with your spending habits, and understanding how those spending habits impact the type of card you have.
Who should have a low interest credit card?
Whilst there is no dispute that credit cards low interest rates are very popular, that doesn’t necessarily mean they are the right card for you. First of all you need to examine your spending habits. Do you use your card frequently and carry a balance over from month to month? If this is the case, a low interest rate credit card could probably be right for you, but go through the check list below and confirm that the criteria listed apply:
- You make frequent purchases using your card
- You make regular repayments, but don’t pay the balance in full
- You have an established good credit rating
- You have a regular stable income
Qualifying for a low interest card isn’t always easy, but it is worth making the effort for the benefits that can be gained.
It is important to have a good credit rating to be eligible for a low interest rate card. Because of the low interest rate the credit provider doesn’t stand to make a large amount of money from your account, however, they will trade off profit for reliability and low risk. But the key note here is a good credit rating is required to qualify for the low rate card. If you think you qualify complete a low interest credit card application.
Making a judgement call
Now even whilst you may qualify for a low interest card, that doesn’t always mean it’s the right card for you.
If you fit the criteria below, then a low interest card is probably not right for you:
- Your card is used infrequently
- You make large purchases with your card and pay them off each month
- You pay your account in full every month
- You pay any outstanding amounts within the interest free days
- You want a debt consolidation and low interest balance transfer credit cards
- You have a poor or no credit rating
- ou have defaulted on payments in the past
- You have not been able to maintain credit card payments in the past due to money problems
Not every consumer gets the best benefits from a low interest card. The biggest beneficiary is the person who uses their card frequently, makes regular payments, but carries a balance over. If this is not how you use your card, you need to be looking at alternative to best low interest credit cards.
If you like to have a credit card for emergencies or the occasional large purchase which you proceed to pay before the due date, then a low interest card is not much value to you.
Low rate credit cards are not a good option for the consumer looking to get low interest balance transfer credit cards. There are better options available for these people who want a low interest credit cards balance transfer. Try looking for a card with a zero interest rate for a fixed period for a balance transfer. This way you have an opportunity to reduce your balance during the introductory period with no interest.
Of course to get the full benefit of one of these types of offers you need to try and pay your debt before the term expires, since the interest then reverts to the standard rate. If you don’t think you will be able to pay it off within the introductory period and you will still have a balance outstanding then a low rate interest credit card might be an option.
Low interest cards are not for everyone but matched to the right consumer and used properly they can make a lot of difference to how well you manage your credit.
Once you have decided that a low interest credit card will meet your needs, the next step is knowing exactly which one to select. This can be as hard as working out which is the right type of card; there are so many choices and features available on the market.
Low interest cards do tend to be less complex than some of the other high end cards. Their obvious benefit is a low monthly interest rate. So perhaps a good starting point is to look at what rate of interest is being offered, since this is the one thing that will affect you the most.
Features and fees to look for
You already know you are looking for the best low interest card to save you money, but it’s a good idea to check for any other little surprises, by way of fees or charges.
With low interest rates or a low interest fixed rate credit card, check for:
- Cash transaction or cash handling fees
- Annual fees
- Low introductory rates
- Foreign transaction fees
- Any extra features
The list above covers a few of the basic features you should be checking for when you look at different credit providers. Some features will be more useful to you than others dependent on how your card is used.
Important Features: Low Annual Purchase Rate (APR)
It can be taken as a given that the most important feature of a low interest fixed rate credit card is the interest rate component. The APR is the interest rate applied to the purchases you make during the course of a year. This would also include the annual fee of your credit card. You will find quite a few low interest cards don’t charge an annual fee, which is something you should check for when looking at providers.
Qualifying for the best, which of course is the card with the lowest APR, will be dependent to a large extent on your credit rating. You will be offered the best options when you have a good rating. You may need to commit to higher minimum payments, as an indication of your reliability and credit worthiness if you want to bargain for more competitive rates.
Cash transaction and cash handling fees
These may not affect you, dependent on how your low credit card is used. If you make regular cash withdrawals and you are planning on getting a credit cards low you need to check whether these are covered within your low interest rate, generally you will find they aren’t. Cash transactions, which include ATM withdrawals, foreign currency exchange and traveller’s cheques, usually have a high interest rate of their own and can also include other fees. These types of transactions can soon decimate your credit, use them cautiously.
Other fees
Don’t overlook fees, those deadly little surprises that can attach themselves to credit cards, without you even noticing until it’s too late. Remember low interest credit card transfer have their fees too; you just need to be aware and watch out for them. Fees can come from the low interest credit card transfer of your balance, or overseas purchases just to name a couple. Read the terms of your card carefully so you know what to expect.
Low Interest Introductory offers and specials
Low introductory offers and specials are usually promotions that are intended by credit cards low providers to entice new customers. They usually consist of low rates for a short period or some type of rewards from your purchasing. Whilst these are not normally essential features some people like to have them.
But one of the most popular and useful features is a 0% rate in some instances for up to 12 months. This could be a very beneficial feature if for example you were making a larger than normal purchase and wanted a bit longer to pay it off without paying an excessive amount of interest.
Sometimes you will find rewards programs offered with low interest rate credit cards, these are features where you are awarded points based on the value of your purchases. But again unless these are really important to you, leave them alone, they are not really essentials and shouldn’t be influencing your decision.
The features that you need to be on the lookout for are low rates, little or no fees and no annual fee – these are more likely to give you financial savings than some of the other promotions.
When looking at the promotions and offers never forget the cardinal rule: different benefits apply to how you personally use your credit cards low. If you have no plans to go overseas then it is immaterial to you if the foreign exchange fee is high, only consider the things that will affect you.
Using low interest credit cards
We have discussed at some length the benefits of low credit card rates and the different type of user. Now a lot of people fall into the category of carrying over their debt each month, which is why they are looking at a low interest card in the first place. But good as the low interest credit card transfer sounds you shouldn’t lose sight of the ultimate goal which is to pay your card balance in full eventually.
It’s very easy to get carried away with the spending and the rude shock is when the statement arrives and it’s all tallied up, then you realise you haven’t got enough money to pay it in one go.
The advantage of your low credit card is that even with a carry over the interest rate should still be manageable. But it would be more sensible to work out a budget and manage your spending so you know exactly what you can and can’t spend each month.
Online account management
There have been some rapid advancements in technology over the last few years, and these days it is second nature to most people to manage their accounts online.
When you manage your credit cards low interest card online you can check your account at any time of your own choosing, you can make transactions, check balances, and know that you are accessing a secure service.
Today you will find nearly every banking and financial institution offers you access to electronic banking facilities to manage your low interest credit card. A huge time saving compared to the days of queuing up at banks or having to visit all the branches to find out the deals.
Security
Always take precautions when accessing your credit cards low interest online information, keep your user name and password somewhere safe. Don’t get caught with scam emails pertaining to be from the bank and contact your bank straight away if you think any suspicious activity has taken place on your account.
Remember the bank will never ask for your personal details by emails, if you receive such a request report it to the bank and forward them a copy of the email.
Check For any extras
Look for loyalty offers, some banks and credit providers will reward loyalty with special low rates in return for staying with them and not moving to another provider. These types of offer are assuming you are an existing customer.
Do you make a lot of cash withdrawals? These are one of the most expensive transactions, but you will find a few offers for credit cards low interest that will include these types of transactions as well. If you really need cash for whatever reason, it is better to use your debit card.
Because with a debit card you are using your own money there are no fees or interest charges on cash transactions. When you do use your low interest credit cards for cash transactions be careful to check the payment hierarchy on your low interest rate credit cards. Usually any repayment made is applied to the lowest interest debt. So, keep in mind if you are running up high interest charges on cash withdrawals that interest will keep accruing whilst your payments are allocated to your purchases first.
When not to use your low interest card
Don’t use your low interest credit cards for large one off purchases. You will get more benefits using an introductory zero rate card – this way you could get up to 12 months to pay without any interest being charged.
Low interest cards are not suitable low interest balance transfer credit cards, when you are trying to consolidate and reduce your debt. You will be better off finding either a 0% balance transfer deal or a fixed life transfer.
Checklist:
Print off this checklist and use it when looking for the right low interest rate credit cards for you:
- Research all cards first.
- Check for an annual fee
- Is there an introductory interest rate?
- How long does the introductory rate last?
- What will the long term interest rate be?
- Does the card have a loyalty program?
- Are cash transactions covered by the low interest rate?
- Is there a cash back offer?
- Are any sweetheart deals available?
- Is the low interest rate fixed or subject to change?
- How many days is the interest free period on monthly unpaid balances?
When you think you have found the right card and the right offer, don’t be hesitant about asking any questions if you are not sure about something. If the credit provider or bank doesn’t help or you are still confused try talking to a financial advisor.
Final thoughts
Taking out any form of credit is a serious decision and one that shouldn’t be undertaken lightly. Even though you may be struggling financially and can’t make ends meet, be really sure that taking on further credit won’t be adding to the burden as opposed to mitigating it.
However, on a positive note, finding the right deals or consolidating your debt and managing your finances properly with low interest credit cards or low interest credit card balance transfer may solve a lot of problems by way of getting rid of those high interest charges you currently have to pay. Low interest cards can have a lot benefits when used in the right situation and by the right type of spender.
We have provided a lot of information here which hopefully will assist you in making the right choices as to what is right for you and your financial situation, whilst also knowing how to get the most benefit from your new low interest card. Check online to complete a low interest credit card application.
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