Low Interest Credit Card Problems

June 17th, 2010

Most people would believe that finding a credit card with a low ongoing rate would be a great idea. Unfortunately there are some problems with low interest credit cards that some people aren’t aware of.

Problems with Low Interest Credit Cards

Ideally, if you know you’re going to carry a balance on your credit card for a little while before you can afford to pay it off, then opting for a low rate card could be a good way to save money.

Here’s a quick look at some of the problems with low interest credit cards that some customers could encounter:

Introductory Rates

Sometimes the very lowest interest rates being advertised on credit cards can be a bit deceptive. While the banks do state that some of their lowest rates are available only on balance transfers, they don’t adequately explain that the same rates aren’t applicable to any purchases you make using your card.

Purchases and cash advances are generally charged at much higher rates. Be aware that if you’re aiming at a low rate card to reduce your interest on an outstanding balance, you should steer clear of using your card for other purposes.

Interest Free Days

Some credit card issuers offer great-sounding low interest rates on credit cards, but don’t always offer any interest free days on purchases. This means your interest is being charged from the day you make a purchase, regardless of how disciplined you are in paying it off on time.

If you know you’re the type of customer who will repay the balance before the due date each month, shop around to find a card offering an interest free period on purchases.

These types of customers are able to benefit from paying no interest at all on the amounts they spend on a card, so having access to interest free days becomes more important than the actual rate charged.

Rewards Programs

Another of the problems with low interest credit cards you may encounter is that, in exchange for offering low interest rates, some lenders will remove access to rewards programs.

Customers who use their credit cards frequently and are diligent about paying down their balance regularly can benefit from rewards programs.

The key to choosing the right credit card for you is knowing what type of customer you are and then tailoring your financial products to suit your own personal financial situation.