The lowest credit card rates are not too good to be true but sometimes, they can be challenging to manage. The average Annual Percentage Rate (APR) is less than 15% for these types of credit cards and they are most often assigned a variable rate that can change over time.
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Financial institutions market low APR credit cards for a variety of consumers, but many are customers who already have active credit cards with high balances. They take advantage of these lower credit card rates to transfer the balance they owe, usually at a much higher APR, to one with 0%.
The majority of the credit cards with low APRs introduce them for a specific timeframe. The most common is six to nine months, but some can last up to 18 months. During this introductory period, the zero or low APR applies to purchases and if included, balance transfers.
You may need to repay your credit card balance in full to qualify for the introductory APR so it is best to refer to your guidelines. You must understand the importance of the APRs and how they can be adjusted, especially with the passing of the CARD Act of 2009.
Credit card companies are no longer allowed to blatantly raise your APR, as long as you honor your financial obligations.
Knowing how these new rules affect your credit card, APR ensures you remain in compliance. This includes other features your credit card offers, like cash advances, which often carry separate, higher APRs.
Once the introductory APR ends, the amount is adjusted. The credit card company reviews your credit history and determines your new APR. Unless you have acquired a fixed APR, which is more stable, you can see an increase of up to 15% or more.
Although the majority of these cards have introductory rates of 0% for a limited time only, it is still an excellent way to eliminate debt quickly. The transferred balance will now become a part of the new credit card’s terms and this allows customers to repay their loans much faster with less interest.
Advantages of Low APR Credit Cards
Low APR credit cards can help increase your credit score when partnered with low balance transfer offers. By eliminating outstanding debt on an active credit card, your debt-to-credit ratio is reduced; according to Suze Orman’s philosophy, this is a contributing factor to raising your overall score.
Having a high balance on multiple credit cards can send signals to certain lending institutions that you are not managing your finances responsibly. It’s best to have active accounts, with low or zero balances. If you cannot pay your balance in full each month, always pay more than the minimum amount due, which is usually the APR only.
Consumers who have good credit and very little debt can take advantage of low APR credit cards to make large purchases that can be repaid well within the introductory period, essentially securing an interest- free loan.
Low interest APR credit cards also have good features, like the More Card from Discover. They offer cash back bonus options in addition to the 0%APR on purchases and balance transfers. They also protect you from consumer fraud through various devices.
The Chase Freedom Credit Card has comparable features, they also offer cash back rewards. It also has no annual fees and the rewards are unlimited.
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Disadvantages of Low APR Credit Cards
Low APR credit cards also have some drawbacks and should be monitored closely. Some customers may find themselves overspending because the interest is so low. Knowing you are only repaying the amount spent within a 30-day time frame, without interest can cause you to use the credit card more; especially when you gain rewards points or cash back for virtually every purchase.
Not reviewing your terms and conditions in full can have dramatic implications. Because most low APR credit card offers are only temporary, you should make paying the balance in full a habit, as soon as you take possession. Once the introductory rate expires and the new APR is applied, you will be required to repay the balance in accordance with the contract you sign.
Low APR Credit Card Qualifications
To be considered for a low APR credit card, you should have a credit score of at least 700. To make sure you receive the best offers, it is imperative that you examine your credit report and confirm all entries are valid and accurate.
While most credit reports are virtually error-free, there are common mistakes that occur frequently enough for the three credit bureaus to have a dispute process in place.
If you notice a vendor has listed incorrect information, you have the right to request assistance from TransUnion, Experian, and Equifax to investigate and resolve the issue.
Low interest credit card rates are not all good or all bad; they are useful resources that can help you in a variety of ways. Make sure you have a good plan before you apply and never stray from the primary goal. While they are excellent for eliminating debt, they can also propel you into the abyss if you are not extremely careful.
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