A Closer Look at Low Interest Credit Cards
Truth be told, credit cards were not designed for one to carry balances. However, life happens and we oftentimes end up with balances on our credit cards at a very hefty price. Wallet Savvy is here to help you choose a low interest card that will help you save big dollars and get out of debt much sooner.
Contrary to popular belief, collected interest is not the only source of revenue for banks and credit card issuers.. The other big source of revenue for issuers is the commission they receive for every swipe you make with their card at a store. It is primarily for this reason that all issuers want you to use their credit card everywhere.
Credit issuers understand the different needs of their customers and offer appropriate solutions to help in each case; however, they do a poor job of matching the appropriate solution to the individual. Trust Wallet Savvy to help you select card(s) that offer the best and lowest interest rate for you to save.
Four key points to consider:
1 – Low interest cards
Issuers often have cards that offer low interest rates on a permanent basis. Most of the cards do not have fancy rewards programs, additional benefits, or other perks. As such, if you do not have or do not plan to carry a temporary balance on your card(s), low interest cards are not for you. You should look into cards that offer rewards and benefits as you can greatly profit simply by using them with your monthly expenditures.
2 – The low interest credit card offer trap
Credit card issuers often send you an “introductory balance switch” offer at a very low interest rate for a small period of time – anywhere from three months up to the first year. The trap here is that after the promotional period, the interest rate goes up to the original rate of the card – usually in the 20% range.
In most cases this is not the right card for you. Only select this offer if you know with certainty that you can pay out your balance in full during the promotional period. You should consider credit cards that offer permanent low interest rates in the single digit or lower double digit percentage range.
3 – The unexpected temporary balance
Most of us have been there – you make your regular monthly purchases on the card and then your mechanic calls you with a $3,000 new transmission bill that you have to settle. With life being unpredictable, you do not have many choices in this scenario - you pay with your credit card which has a regular interest rate of 21.99% and are forced to keep a balance for a few months until you can pay it off.
Here is a tip for you to keep in your back pocket for such a rainy day. All you have to do is call your credit card company and ask them to offer you a temporary low interest rate option that they may be running at that time. Credit card companies would rather keep you as a customer at a lower promotional rate for a few months than lose your business completely. However, if you know you will not be able to settle the balance during the promotional time as discussed above, consider applying for a low interest rate card and transfer the balance. Enjoy the savings with minimal hassle!
4 – Keeping your credit score high with balances – the rule of 60%
You may have already read in our article 5 Steps to Rebuilding Your Bad Credit that keeping high balances on one card will start lowering your overall credit score. The industry secret is quite simple – the rule of 60%. Try not to exceed 60% of your authorized limit with your balances.
For example, assumeyou have two low interest cards at a rate of 11%, each with an $8,000 limit. Let’s further assume that you have a balance that you want to keep on your card of $7,500. Now, armed with this industry “secret”, you are much better off to split the balance between the two cards not exceeding 60% of the limit, rather than keep the full balance on one card only.
Wallet Savvy can help you select a combination of two or three low interest cards to keep your interest payments low and your credit score high. Talk to your family and friends and start helping them understand the credit card world – spread the word and help them become Wallet Savvy.