Low interest credit card pitfalls
Although low interest credit cards are very popular in order to reduce finance charges and interest that a credit card user would otherwise pay there are some pitfalls with credit cards.A low interest credit card offers the same service, loaning money, for a considerably lower amount of cost. Interest is in some ways a wasted payment, and it should be reduced if it is possible. There are a number of things to think about.
Among the things that should be looked at are the fees that are paid out. These can cancel out interest savings, particularly when the balance on the card is low. The low interest period is another thing that should be looked at. Many low interest periods are introductory offers. These are for short periods of time particularly if they are for very low interest rates. The periods can be between three and fifteen months. The periods are usually advertised in the credit card offers. This can be either on the balance transferred or the spending that is done on the card. After the introductory period is over then the balance will go back to the default rate. This can be higher than other credit card rates.
Some low interest credit card rates can be an ongoing rate. This is an interest that is not limited in time. This will be higher than the introductory rates. In some cases there will be a guarantee that the card will keep at a low rate, often pegged to the Reserve Bank of Australia’s rate but sometimes fixed. This will often be higher than an ongoing rate without a card. It may also be the case that a card will have a low interest rate on one type of balance but have a higher interest rate on another type of balance. A credit card user should ensure that all the relevant balances have a low interest rate. The three types of balances are those that arise from transferring credit from another card, those that arise from spending and those that arise from cash advances. Cash advances are usually charged at the highest rate.
Low interest credit cards will also tend not to have rewards programs. Rewards programs include features such as cash back on spending.Free insurance on items bought on cards can also be affected. This can include travel insurance, extended warranties and purchase protection.