How to Choose a Low Interest Credit Card
Pick the Best Low APR for Any Financial Situation
Mar 27, 2009
Hefty annual percentage rates (APRs) can turn a few months of missed payments into ballooning debt. Anyone experiencing or expecting trouble paying a credit card bill needs to ask himself or herself the following questions before selecting a low interest credit card.
- “Do I use my card for purchases only or for cash advances and balance transfers as well?”
- “How large of a credit card balance am I carrying?”
- “How much do I usually pay in interest?”
- “What features on my credit card do I need?”
- “How good are my credit and my relationship with my current credit card company?”
What to Know About Low APR
The Federal Reserve Board explains that there are several different APRs that one low interest credit card may carry. A credit card may have a low APR on purchases, but have a higher APR on cash advances and balance transfers. Someone with a 14% APR on purchases may be walloped with a 19% interest rate on balance transfers. Before selecting a credit card, find the best APR possible for the most frequent kind of transactions made with the card.
Different Low APRs, Different Choices
Consumers wanting to get a low interest credit card must also read the fine print on how their low APR is calculated and how it is applied. A fixed rate APR stays the same over time. A credit card company may increase their fixed rate APR, but they must notify the consumer in advance.
A variable rate APR rises or falls based on another interest rate – such as the prime or treasury bill rate. Deciding to choose a fixed or variable APR depends on the current economic climate and the consumer’s comfort level. One consumer may anticipate a low prime rate and a great variable rate APR, while another may prefer to have a fixed rate instead of watching his or her APR go up and down.
A tiered rate APR applies different interest rates to different levels of an outstanding balance. A 14% APR may apply to balances up to $500, while anything over is subject to an APR of %15. Be realistic about how quickly a large credit card balance can get paid off when considering tiered rate APRs.
Low Interest Promotions on Credit Cards
An introductory APR is only temporary and will be replaced by a higher APR after the introduction period ends. A delayed APR is an interest rate that will apply at some point in the future. “A card may advertise that there is ‘no interest until next March’,” explains the Federal Reserve Board. “Look for the APR that will be in effect after March.” Understanding when an introductory or delayed APR ends and what it will be replaced with is crucial for anyone about to choose a low interest credit card.
Annual Fees on Low Interest Credit Cards
A credit card may charge annual or monthly fees. Calculate which costs more – the credit card fees or the monthly interest being charged on the current credit card. Someone paying $35 in interest every month on a card with a 19.75% APR will want to switch to a low interest credit card with an annual fee of $25. The Federal Trade Commission cautions that some fees can have an immediate impact on credit. “For example, a card with a $250 credit limit and $150 in fees leaves you with $100 in available credit,” they write.
Negotiating with Credit Card Companies
Good credit is needed to receive most low interest credit cards. People with a long-term relationship with their credit card company may want to see if they can switch to one of the company’s lower interest credit cards or if they can negotiate a lower rate on their present cards.
Students just starting out can take advantage of special credit card deals for students. Although the credit limit is usually lower than regular credit cards, most student credit cards still offer relatively low APRs and are a good way to build credit.
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