Low Interest Credit Cards – Scam Or Benefit

Low, as low as zero, interest on the credit card sounds attractive. Who wouldn’t wish to borrow money and pay it back at leisure with no ‘penalty’ But what sounds like honey can often be laced with bee droppings.

For individuals with excellent credit yes, it is possible to obtain a card having a comparatively low interest rate. Rates as little as 5% are still possible, though likely not for very long. (9%-15% is more common, which is still good for credit debt.)

For those with less than stellar credit, low interest rate offer is more likely likely to be one with hidden clauses.

Look for caps on amounts charged or transferred. Some offers permit the low rate only on transferred amounts. Other contracts specify limited periods. (6-12 months is typical, 15 months is possible.) After that time, the low interest rate automatically switches towards the normal APR on any remaining balance.

What is an APR And what constitutes ‘excellent’ credit

APR is short for for Annual Percentage Rate. Suppose you charge $100 and also the APR is 12%. Does that mean you pay $12 in interest for the year Probably not. The APR is divided up right into a monthly rate, 1% per month, and applied Every month to ANY outstanding balance.

How good your credit is depends heavily on your FICO score. (FICO is a number calculated by a secret algorithm that takes into account total outstanding debt, number and length of late payments, along with other factors.) That number, along with an analysis of your credit report, containing age, period of credit history, kinds of debt, etc, determines the way the card issuers view your credit history.

For those who pass the ‘good credit’ filter, you will find multiple criteria to consider.

Do you pay off your whole balance due when the bill arrives If that’s the case, the APR is irrelevant since companies almost always forego applying any interest whatsoever. (Note: They’re not necessary to. Technically, interest charges begin in the date of purchase, not when the statement is created.)

Do you use the card to make large amount purchases, or accumulate large balances in one month If not, the difference between a low interest rate and also the normal APR is generally insignificant.

Most low interest cards have ‘fine print’ limitations. Included in this are limited time periods, after which it the APR increases, caps on credit amount, etc. One low interest card type, the ‘balance transfer’, often limits the rate to the amount transferred. Interest on any new charges are calculated in the normal rate.

Also, remember that cards actually have several APR. One rate applies to normal purchases, another to payday loans, etc. Read the contract carefully.

For those tempted to accept the low or zero interest offer, intending later to switch to another when the offer expires, a thing of caution. Switching cards frequently can harm your FICO.

Every time you apply, a credit report is created and analyzed. Your FICO is partly determined by the number of those credit checks performed. Also, your score is relying on the length you have held a specific card. Many cards acquired in a short period is a red flag.

For those with genuinely a good credit score (680 or higher, in conjunction with additional factors) a low interest card is really a deserved reward for responsible behavior. The majority are free of annual charges. And, if you maintain a monthly balance on the substantial amount, these cards can save you a significant sum.

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