Who Wants
a Low APR Credit Card?
When used
properly, a low APR credit card can be a great financial
help. When used unwisely, it can be a drain on your
budget. If you are unable to pay off the entire credit
card balance at the end of the month, then a credit card
with a low APR is essential.
APR is an
abbreviation for “Annual Percentage Rate”. Simply put, it
is the total cost of credit expressed as a yearly
interest rate. That means, it adds all the
“miscellaneous” charges in with the interest rate to give
you the complete interest charge you can expect to
pay.
APR rates
are good because it allows you to compare credit card
offers. It puts all the costs you pay for a credit card
at your fingertips. It should eliminate any surprise
charges. For example, some companies advertise a very low
interest rate. However, if you read the fine print, they
will charge additional fees. An annual fee is an example.
By the time you add in the additional fees, that low
interest rate isn’t so low.
The APR is
usually calculated each month based on what you still owe
on the credit card. The interest charge is calculated as
if the current balance will be the same for the next
twelve months. The total interest is divided by 12 to
determine the current monthly charge. When looking for a
credit card, always get an APR rate before signing any
agreement.
Here’s the
main point. Always get the lowest APR credit card you
can. Shop around. Compare APR rates. Don’t simply pick
the first credit card offer you come
across.
Why
choose a low APR credit card?
How much
interest you pay on your credit card depends on the
APR. The lower your credit card balance, the less
interest you will have to pay. Whenever possible, pay
down the balance of your credit card as much as possible.
Don’t just continue paying the minimum
amount.
You should
also read the fine print. Low Credit Card APR’s can be
fixed or variable. Make sure you understand any credit
card agreement before you sign.
You can find
many low APR credit card offers online. Online is a good
place to start looking for credit cards. However, there
are many different types of credit card offers. Each
company uses their own factors to determine what rate to
offer you.
Make sure
you ask a lot of questions. You need to know if the APR
is a fixed rate or a variable rate. Fixed rates are
better because your payments don’t change too much.
Variable rates change how much you have to pay. If it
goes down, that’s great. However, if it goes up it can
ruin your budget. Try to get a fixed rate
APR.
Ask if there
are any other charges. Some companies offer optional
payment protection plans. If you don’t tell them no, you
will pay more money. Other companies charge an annual
fee. Avoid those companies. An annual fee simply means
you pay more money.
When looking
for a low APR credit card, be aware that you can get some
very good initial offers. For example, almost all low APR
credit card offers 0% APR for the first six to twelve
months on purchases, cash advances, and balance
transfers. Other credit cards allow you to accumulate
rewards or rebates from the items you purchase. Some
companies offer $0 liability on unauthorized purchases,
and no annual fees.
Some credit
cards offer special discounts on items you purchase. For
example, a 5% rebate on gas and up to 1% on everything
else. Still others offer good deals if you have high
balances on other credit cards. They will allow you to
transfer those balances to their credit card for no cost.
In addition, you pay no interest for several months. This
is really a good deal if you work to pay down your
balance.
As mentioned
earlier, a credit card can be useful and convenient… as
long as you use it properly. Use your credit card to
build a good credit history by making your payments on
time every month. After the initial introductory period,
you will have to pay interest. Take advantage of those
special introductory offers. After all, that’s the reason
you applied for a low APR credit card in the first place.
If you do your homework, there won’t be any
surprises.
Low APR
Credit Card
|