Low Interest Credit Cards
While zero credit cards might look like a great deal, the low interest ones are better for sure. Why so? Because quite often it turns out that a zero credit card is more expensive than a low interest one! Zero interest is a good thing but when it is combined with so many restrictions and penalty clauses, it becomes not such a great option, especially in the long term. Besides, low interest credit cards with real benefits are easier to obtain than the really good zero interest ones.
Low interest credit cards come in two varieties – with a low introductory ARP rate or with a fixed low ARP rate. In the first case a low interest credit card is much like a zero credit card because you have a lower percentage for six months, a year, or as long as the introductory period is negotiated and then the ARP goes up. In the second case the low interest rate is fixed for the whole period, though it can be changed under certain circumstances (you being late with a monthly payment, for example). It is not possible to say if a low introductory rate is better than a low fixed rate for the whole period – everything depends on the particular situation.
Similar to zero credit cards, low interest credit cards are great for clearing old debts because in this case you actually pay less interest than with a standard credit with an interest rate of 10-15% or even more. Low credit cards are good also if you plan to make large purchases and repay them back before the introductory period is over. But you need to be very careful when you make estimates about what you buy and how much you can pay because if you fail to repay your balance before the introductory period is over, any savings due to the lower interest rate will be gone with the wind.
As with zero credit cards, offers for low interest credit cards are abundant and come in different varieties. You do have a choice but having so many offers to choose from also means that you need to do some research in advance because otherwise you might easily be tricked to accept an offer that is not to your best advantage.
One of the traps to avoid when choosing a low interest credit card are benefits. Credit card issuers offer numerous incentives in order to attract customers but more often than not you actually pay for these incentives, so think twice. For instance, if you need a low interest credit card in order to repay old debts, getting such a card that offers cash back incentives is not a great idea because you need the card to pay for oldl debts, not to accumulate new ones. Most likely cash back incentives will make you spend more, which is certainly the last thing you need in your present situation.
Another trap to watch for are penalties. Even the most diligent payees can be late once or twice with a payment or fail to pay it at all. You might be certain that you will never do it but one never knows. So, even if you don't plan to be late with payments, make sure that the card holder agreement does not provide strict penalty clauses for one late payment. Many issuers have such penalty clauses – like a drastic increase of the interest rate (for the rest of the period, not for the current month only) after a late payment, so just beware that you don't fall into this trap, which will make the lower interest rate obsolete.