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Low Interest Credit Cards - Are They Right For You?

By Richard Greenwood

Republish: EasyPublish™
Published: 17Dec2008
Word count: 536
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Some card companies offer low interest credit cards as a means of attracting customers, but believe it or not, these cards aren't perfect for every person. It comes down to how you use your cards that will determine which is best for you.

Low interest cards may be appropriate for someone who tends to carry a balance from month to month. For these people, the lower interest rate will reduce the amount of finance charges they pay. But remember, some cards will charge a very high annual fee to make up for the continuing loss of interest, so read the disclosure carefully.

Also, the low interest rate may end if you make a late payment, either on the card itself or on another card. This "universal default" clause, where your rate on one card goes up if you're late on another, unrelated payment, has come under fire recently, but it's still in many contracts. If you sign one of those contracts, you could find yourself paying the default interest rate—which can be s high as 30%—rather than the advertised, low rate. Your only way out at that point may be to close the account and find another low rate card, if you can.

Low rate cards typically do not offer any "extras", like air miles, cash back, insurance, or rewards points. If those are important to you, you'll want to compare offers to see which ones provide the features that matter most to you. There are also affinity cards that can benefit your alma mater or favorite charity, but don't forget to check annual fees and interest rates. Giving to charity while needing a loan to make your credit card payment doesn't make much sense.

If you don't carry a balance every month, a low rate card won't save you much money. You'll want to compare credit cards on the basis of annual fees, grace period (the time between when the statement is prepared and when the payment is due), affinity, or rewards.

However, there are times when a really low interest card makes sense. Can you open one of these cards and invest the money at a higher rate? Zero-percent cards can make sense in this instance — if the credit card checks are also at zero percent. Read the fine print. Purchases or investments made with the checks sent along with your card are not always at the same interest rate as those made with the plastic itself. And don't forget, you still need to make the minimum monthly payments on time until you cash in your investment and pay off the credit card.

Low interest credit cards offer benefits, and for the approximately two-thirds of Americans who carry balances, that benefit can be sizable. They can utilize that low rate to reduce the total interest charges paid while trying to clear the principal balance.

But things can and do change, and if your low interest rate changes, be sure to compare credit cards again and find one that suits your current situation. There are plenty of card issuers out there, and as long as you've paid on time, your options should be open when you want or need to change.

Richard Greenwood is Director of the Click 4 Group who operate an network of finance comparison websites which compare low interest credit cards and provides tips on getting a new credit card.

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