Low Interest Rate Credit Cards
Use them if: You tend to have some credit card debt at the end of the month
Advantages: Your debts will accumulate interest, and given the variability of interest rates from card to card, you can easily end up paying twice the amount you need to. There are two kinds of low interest credit cards: 0% introductory APR, and low ongoing APR. The first kind allows you to make a big purchase and pay it off over time (usually 6-18 months) without having to pay interest. The second is helpful if you continually have credit card debt, and just want to minimize the impact.
Disadvantages: If you have a 0% intro APR card, when the intro period runs out, the interest rate is usually fairly high. If you haven’t paid off your debt by then, you’ll be stuck with a very high rate. If you have a low ongoing APR, the danger is that you’ll get in the habit of carrying a balance. Not only is revolving debt a slippery financial slope, but it lowers your credit score.
What to look for:
0% intro APR:
- How long is the introductory period before the ongoing interest rate kicks in? The intro period is usually between 6 and 18 months, though Citi now offers 21 months interest-free.
- Is there also an introductory period with no balance transfer APR? You can shift existing debt to another card and avoid paying interest for a while.
- What’s the ongoing APR? If you go for 0% intro APR, the ongoing rate might be high.
- Is there an annual fee?
- Will you earn rewards? You generally won’t, but you may get lucky.
Low ongoing APR:
- What is the interest rate? Credit unions usually offer lower interest rates than regular banks.
- Is there a penalty APR? If you miss a payment and the card has a penalty APR, you may find yourself paying upwards of 25% interest for 6+ months.
- What are the “shrouded” fees, like foreign transaction, cash advance or annual fees?
- Will you earn rewards?