Generally, we believe that credit cards have interest rates between 19% and 25% (or higher for some specialized reward cards). With a low-interest rate card, your rate will vary between 10% and 15%. These types of credit cards usually come with no reward system and are best suited for those who need to keep a balance month after month. Be aware that some low-interest credit cards come with an annual fee that can encroach on the lower interest rate. In addition, this low-interest-rate can prevent you from doing certain types of transactions. Let’s take a look at the pros and cons of using a low-interest credit card. It is important to obtain as much information as possible before using any type of financial product.
The benefits of a low-interest credit card
Lower interest charges
Obviously, the biggest benefit of having a low-interest credit card is the money you will save on monthly interest charges. Although we do not suggest that you keep a balance on your credit card every month, we also understand that sometimes it’s quite inevitable. If you are currently going through a difficult time, you may have no choice but to use a credit card balance and you should definitely go to the low-interest credit card options available for you. If you qualify for a credit card with a 10% interest rate, you can save more than 50% of your interest charges each month (based on your current interest rate).
Ability to reduce annual fees
Some low-interest credit cards have zero annual fees and some do not. If a low-interest card comes with an annual subscription, it is usually less than $ 50 a year. If you are currently using a high annual fee card, going to a low-interest rate card with lower annual fees could save you a lot of money. Be aware that some credit cards that have average interest rates (usually around 20%) do not have annual fees. It may not be worthwhile to change your card and start paying annual fees.
In general, interest rates greatly contribute to an individual’s ability or inability to repay credit card debt. A low-interest credit card can be a great option for those looking for a way to lighten their debt by themselves. A balance transfer credit card is another option to lighten your debt. This type of credit card usually comes with a 0% interest rate for a short introductory period. This is where a low-interest credit card could be a better choice. If you can not pay off your debt in the time period where you have a 0% interest rate, then it is a waste of time and money. Choosing a reputable debt consolidation is often a better option for those looking to get out of debt.
The disadvantages of a low-interest credit card
Limited rewards systems
In general, a low-rate credit card does not come with a rewards program as extensive as for other higher-rate cards or travel. It is the low-interest rate that you get that is considered the main benefit of one of these cards.
The low-interest rate trap
A low-interest rate is a great benefit that can help you control your consumer debt and free you from it. Unfortunately, it is very easy to fall into the trap of low-interest rates. This happens when you become too comfortable with your monthly interest charges so low and you have no serious reason to repay your balance. It is easy to achieve good financial solvency. If you plan to upgrade to one of these credit cards, make sure you do not fail by loading your card too much but keep a balance.
Balance transfers are not free
A low-interest credit card can help you repay your credit card debt by helping you save on interest. It is possible to transfer your current credit card balances to a card with a lower interest rate, this is called a balance transfer. While a balance transfer could potentially save you a lot of money, they are also not free. The fees associated with balance transfers are often so high that they cancel the benefit of a lower interest rate.
Monitor the cash advance rates
One of the disadvantages of low-interest rate credit cards is that this rate often does not apply to all types of transactions that are made with the card. This can be a problem for anyone who wants to make a cash advance with their credit card. Low-rate credit cards often have high interest rates for cash advances. However, this is not the case for all low-rate cards. Make sure you understand all the interest rates associated with your credit card before using it.