Just like the money in your savings account, your credit card balance will accumulate interest, but not in a good way. If you have damage from compound charges in your month-to-month balance, you may need to consider switching to a credit card of low interest.
A typical reward offered by many cards in Canada carries a 19.99% interest rate per purchase, and much more for a cash advance. The credit cards with low interest can alter a fraction of this, most of the time between 8.99% and 14.99%. The best 3 reasons and advantages for this (low interest) card include:
Saving Money on (Low) Interest
By paying a lower rate of interest, this can save you hundreds of dollars in the long run. This makes it easier to remove debts much faster since most of the money is used towards paying off principal balances, rather than satiating charges of interest. Credit card rewards are devalued by interest, so there is no use in chasing this if you can barely manage to pay off your entire monthly bills.
You Can Easily Qualify for a Low Interest Credit Card
If there is some kind of whack on existing debt of credit card, you could transfer this to balance your credit card; this offers rates of interest as low as 0% for transfers in the first 6 to 12 months. But these cards are more complex to qualify for since they may ask for a really high credit score for that 0% rate.
If the score you have is not good enough (check this once a year, at least), you will most likely get approval for a low interest credit card that also includes competitive interest rates for balance transfers. These cards also keep lower minimal income requirements.
Compared to other cards, the balance regarding transfer interest rates will not spike after some time. This isn’t as low as with other cards. However, this type of card is a good option if you are certain you cannot pay off debts in the first 6 or 12 months. The annual fee for this card is $20, but this can be offset by the saved amount on interest charges.
Most of the balance transfer credit cards can also charge usual costs of 19.99% rate of interest for purchases. Because of this, the credit cards of low interest have a bigger and longer lifespan – once the existing balance is paid off, you will want to keep using that card due to its low-interest rate offer.
Improvement of Credit Card Scores
Paying off your credit card bills (ideally, all your bills for that matter) timely is the best and simplest way to keep up a good credit score or improve a bad credit score – the payment history accounts for 35% of how the credit score is calculated. In case you do not pay off your balance fully or on time, you ought to make at least the minimal payment that is stated on your monthly bill. A credit card with low or lower interest rates equals lower minimal payments per month.
If you struggle constantly with regular and timely payments, you can have a look at another motivation method: low interest credit cards jack up interest rates (or double them, or more) in case you miss out several payments. If within a year you miss two payments on American Express Essential Credit Card, the interest rate increases from 8.99% to even 23.99%. For BMO Preferred Rate MasterCard, missing two payments in a year changes the rate of interest from 11.9% to 16.9%.
Interest represents the kind of credit card charge that cannot be avoided or escaped. However, low interest credit cards can help you get your debts in control and minimize the amount of money that you spend monthly on interest charges.