Although some low interest credit cards do have some basic reward programs associated with them, typically you’ll find that the best perk is the low interest rate itself. The best cards will have an interest rate that is lower than 10% and some may have an APR as low as 6.99%. Many of these cards will have a variable interest rate that is based on the prime rate, but not all of them do. The one piece of common ground these credit cards have: you generally need excellent credit to get one.
If you do have excellent credit, when should you look for low interest credit cards?
Do You Routinely Carry Debt Over To the Next Month?
If you have a balance on your credit card every month that you don’t pay off completely, then a low interest credit card is a good choice for you. This will help to limit the amount of interest you pay on those balances so that you’re not paying a ridiculous amount of money over time to the lender. In return, you’ll receive a flexible method of paying down a big ticket item or manage your debt more effectively.
If you usually pay off your balances every month, however, a low interest credit card might not be the right choice.
Do You Have an Emergency Debt?
Have you recently had a medical emergency? Did the car break down? These emergency debts can kill off a monthly budget quickly, but that’s not necessarily true with low interest credit cards. Instead of assuming a measure of risk by letting the debt sit until you can pay it, you can put it on your credit card and have a reasonably affordable method of paying it off over time. That’s a lot better than having an account be placed with a collection agency!
You might also be able to work out a payment arrangement that lets you place a prearrangement amount on your credit card every month. This would then qualify each payment for the grace period on most lines of credit, which would help to limit the amount of interest you’d have to pay as long as you pay off the balance month-to-month.
Are You Drowning in Secured Debt?
If you have a lot of secured debt, then transferring that debt onto a low interest credit card is a sound financial decision. Once on the credit card, it becomes an unsecured debt and that gives you some options in case you have some income issues in the future. In general, secured debts cannot be discharged by a bankruptcy and sometimes might not even qualify for restructuring either. When on the credit card, however, they will qualify. Even with a 3% balance transfer fee, the added flexibility you get with the debt is often worth the cost.
How could low interest credit cards help you today? If you’ve got pretty good credit and want to save, a low interest credit card can be a great solution.