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Are Low Interest Credit Cards Really A Good Deal?
You just got an offer in the mail for a low-interest credit card. That sounds great, right? Interest charges make debt pile up faster, so you’re inclined to jump on this credit offer right away.
Hold your horses, friend. Before you take the credit card company up on its offer, there are some things you need to know about low interest credit cards. They’re not all created equal, and even the phrase “low interest” can mean something very different depending on the company – or the type of charge.
When you get an offer for a credit card – any credit card – you should read the fine print before making a decision. Many companies will try and lure you in with offers of very low interest rates, or even no interest. But these rates don’t last forever. If you check out the card’s terms and conditions, you will almost always find that the really low interest rates are just part of an “introductory” period. These can last as little as three months or as long as fifteen, with six to twelve months being standard.
If you have some important purchases coming up, or if you want to transfer your debt from a high-interest card, then a low- or no-interest credit card could be a good choice for you. Pay off the balance in full before the introductory phase ends to take full advantage of the reduced rates.
Also check out the fine print to see which types of charges the low interest applies to. You might be paying 8% interest on purchases, but cash advances can spike that rate to 20% or higher. Balance transfers and over-the-limit purchases are also subject to higher interest rates. If you incur these types of charges very often, you’re better off with an average interest credit card that charges the same amount for cash advances as for purchases.
While you’re reading through the card’s terms and conditions, check out the policy on universal default. If the company participates in universal default, you should look elsewhere for your next card. Universal default means that any time you’re late on payments, your interest rate can be increased. And that increase isn’t just for late credit card payments. Your late utility bill or late car payment could affect the interest rate on your credit card. It’s best to avoid universal default.
Another factor to consider is the card’s grace period. A grace period is the amount of time you have between making a purchase and having that purchase start to accrue interest. The average length of a grace period is about 22 days, but some cards don’t even offer one anymore. Look for one that does.
Sometimes things sound like a good offer until you get into the details. Always educate yourself about a card’s terms before agreeing to become a card holder. Low interest is a great offer, but first you’ve got to determine if it’s for real.
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