The lower the interest rate on your credit card, the less money you will pay overall over the life of any balances you hold on the card.
A low interest rate can, therefore, be one of the most valuable features to look for when you shop for credit cards. Any type of credit card can be a low-interest credit card, including rewards credit cards. Therefore, if you find comparably low interest rates on more than one card, see what other rewards each card may also offer you to pick out the one that offers you the most benefits.
Remember that as you compare cards, interest rates are not the only costs to consider. Also take into account any differences in the grace periods for repayment and the various fees you may be charged regularly or in select circumstances. Finally, beware of credit card interest rate reduction scams that charge you to negotiate a lower interest rate on your behalf you are perfectly capable of securing for yourself.
Credit is not free. It costs money to borrow money. This cost of borrowing, or what is known as the cost of credit, is paid as interest. Interest is a percentage of the balance due on a loan or a purchase added to the balance. Interest is calculated in periods. Every period, the interest is calculated on the remaining balance due after payments are subtracted and new interest charges are applied. Credit card issuers express the interest rate on their cards as a yearly figure known as an Annual Percentage Rate (APR). Interest is generally calculated and charged monthly. However, it is based on the APR divided by the 12 months of the year. This monthly rate is called your periodic rate. The amount in interest added to your credit card balance each month based on this periodic rate is called your finance charge. The primary benefit of a low-interest credit card, then, is essentially keeping your finances charges as low as possible.
While shopping around for low-interest credit cards, beware of variable rates. Some interest rates are fixed, meaning they will not change even if economic indicators change. Other interest rates are variable, meaning they are subject to change when certain indexes or economic indicators, like U.S. Treasury note interest rates, change. With a variable rate, a low-interest credit card can suddenly turn into a high-interest credit card. The bottom line is to make sure the rate on the low-interest credit card you choose is fixed and not variable.
When comparing low-interest credit cards with the comparable rates, one of the other factors to consider is the grace period for payment on each of the cards. Every credit card has a grace period, or a period of days from the time a bill is issued to make the required minimum payment without penalty or to pay the balance in full without accruing a finance charge. Grace periods typically only apply to new purchases. If you take out a cash advance on such a card, for example, interest may start accruing from the time of purchase. Balance transfers, too, are usually ineligible for grace periods and start accruing interest right away. When a credit card provider does allow a grace period, it is required the provider mails you a bill no less than 14 days in advance of the due date.
Some credit card fees can counterbalance and, even, outweigh the savings you get from having a low interest rate on a credit card. Be sure you do not get saddled unreasonably with any of the following fees in exchange for getting a low interest rate:
One of the biggest low interest rate credit card scams circulating now is a type of automated call from a company claiming to be able to help you negotiate a lower interest rate on your credit cards. Usually, these companies claim they have formed special sorts of relationships with card providers and can use those contacts and goodwill to your benefit for a fee. They claim to be able to save you thousands of dollars in finance costs and help you pay off all your debt as much as five times quicker. Typically, providers will also increase the pressure by saying the offer is only a limited time opportunity. They may even offer a money back guarantee as extra incentive.
In any case, as the Federal Trade Commission (FTC) asserts, anything these companies can do for you, you can do just as well for yourself for free. Their relationship with credit card issuers is no more special than yours. You have just as much power and authority to negotiate a lower interest rate on your credit cards as they do, and arguably, more. The FTC also reports the failure rate with these so-called relief services is high.
More recent amendments to the Telemarketing Sales Rule of the FTC forbids businesses selling such services from charging their fees prior to securing the promised low interest rate or other debt relief for the customer. You may still need to place funds in an escrow account while the services are being performed, but at least this way you have the confidence that, if the company fails to deliver on its promises, you will get your money back. You may still, however, have to pay a small fee to the escrow agent to hold and manage distribution (or return) of those funds. To try to get your credit card issuer to give you a lower interest rate on your existing card, call the customer service number found on the rear of your card and simply ask for a reduced interest rate. Be persistent in your efforts, but also be polite, patient and calm.