ow, as low as zero, rate automatically switches to
interest on a credit card the normal APR on any remaining
sounds attractive. Who balance.
wouldn't want to borrow money and
pay it back at leisure with no What is an APR? And what
'penalty'? But what sounds like constitutes 'excellent' credit?
honey can often be laced with bee
droppings. APR is an acronym for Annual
Percentage Rate. Suppose you
For those with excellent credit charge $100 and the APR is 12%.
it is indeed possible to obtain a Does that mean you pay $12 in
card with a comparatively low interest for the year? Probably
interest rate. Rates as low as 5% not. The APR is divided up into a
are still possible, though likely monthly rate, 1% per month, and
not for long. (9%-15% is more applied EACH month to ANY
common, which is still good for outstanding balance.
credit card debt.)
How good your credit is depends
For those with less than stellar heavily on your FICO score. (FICO
credit, a low interest rate offer is a number calculated by a
is more likely going to be one secret algorithm that takes into
with hidden clauses. account total outstanding debt,
number and length of late
Look for caps on amounts charged payments, and other factors.)
or transferred. Some offers allow That number, along with an
the low rate only on transferred analysis of your credit report,
amounts. Other contracts specify containing age, length of credit
limited periods. (6-12 months is history, kinds of debt, etc,
common, 15 months is possible.) determines how the card issuers
After that time, the low interest view your credit worthiness.
the rate to the amount
For those who pass the 'good transferred. Interest on any new
credit' filter, there are charges are calculated at the
multiple criteria to consider. normal rate.
Do you pay off your entire Also, keep in mind that cards
balance due when the bill actually have more than one APR.
arrives? If so, the APR is One rate applies to normal
irrelevant since companies almost purchases, another to cash
always forego applying any advances, etc. Read the contract
interest at all. (Note: They're carefully.
not required to. Technically,
interest charges begin from the For those tempted to accept the
date of purchase, not when the low or zero interest offer,
statement is created.) intending later to switch to
another when the offer expires, a
Do you use the card to make large word of caution. Switching cards
amount purchases, or accumulate frequently can harm your FICO.
large balances in one month? If
not, the difference between a low Every time you apply, a credit
interest rate and the normal APR report is created and analyzed.
is usually insignificant. Your FICO is partly dependent on
the number of those credit checks
Most low interest cards have performed. Also, your score is
'fine print' limitations. These influenced by the length you have
include limited time periods, held a particular card. Many
after which the APR increases, cards acquired in a short period
caps on credit amount, etc. One is a red flag.
low interest card type, the
'balance transfer', often limits For those with genuinely good
credit (680 or higher, in And, if you maintain a monthly
conjunction with other factors) a balance on a substantial amount,
low interest card is a deserved these cards can save you a
reward for responsible behavior. significant sum.
Most are free of annual charges.
About the Author:
Did you like this article about low interest credit cards? Mark Williams offers other great tips and advice about credit cards at his website abc-of-credit-cards.com
Read more articles by:
Mark Williams
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