All credit cards charge interest to consumers. Some people are able to avoid paying interest because they pay their balances in full each month, but they can still be held responsible for additional fees. Charge cards are similar to credit cards, but account holders do not pay any interest.
Although many credit card companies advertise credit cards that come with introductory 0% interest rates, all cardholders end up paying interest. However, there are circumstances in which cardholders can finance their purchases without any additional fees for a period of time. The Federal Reserve details the ways in which credit card issuers may alter interest rates as well as charge different amounts for various purchase categories.
You may currently have a credit card that does not charge you any interest, but you will eventually be paying a set or variable interest rate on the total balance owed. By contrast, charge cards only charge consumers a yearly fee, but these cards do now allow you to carry a balance after the billing cycle has ended.
How do charge cards differ from interest credit cards?
According to a Time magazine article, charge cards were originally created by banks to give consumers a way to make purchases without needing to use cash or checks. Since consumers only took out loans from banks when they wanted to borrow substantial amounts of money, the credit card eventually became a bridge between these those popular banking services.
Since charge cards only allowed consumers to spend what they had available, there was no reason to charge interest. However, credit cards are a type of revolving credit. Not only can cardholders be charged different amount of interest for balance transfers and cash advances, but they can also be hit hard with fees.
The main difference between credit cards and charge cards is the amount of money that cardholders pay for the convenience. Even with a low interest credit card, you may end up paying hundreds of dollars in interest in fees when you have a monthly revolving balance.
Is it hard to be approved for low interest credit cards?
Low interest credit cards are typically reserved for applicants that have proven themselves to be quite responsible. As with other products and services offered by financial institutions, consumers with excellent credit are rewarded with better interest rates and lower fees. Banks are also willing to give new prospects such as students and younger consumers the benefit of the doubt initially.
Anyone that has not severely damaged his or her credit can be approved for a low interest credit card. Premium credit cards may not always give consumers the benefits that they expect; however, having a better credit rating will give you the most options.
There are many different types of credit cards with low interest rates available for consumers with poor credit scores. These credit cards may require a deposit or come with expensive setup fees, but they not that difficult to be qualified for.
How can you minimize the amount of interest you pay on your credit card?
Whether you have a credit card that has high interest rates or excessive fees, you can reduce your interest charges by making smart money management decisions. Maxing out your credit card will nearly always resolve in overage charges, and possibly cause it to be converted to a default interest rate. By keeping your credit card balance as low as possible, you can pay your credit card company less in interest.
Asking your credit card issuer to reduce your APR is also a good way to minimize the total interest paid on your account. You can make a credit card interest rate reduction request over the phone to receive the fastest response, but you also want to make sure that your account is paid up to date beforehand. Bringing unwanted attention to yourself while your account is delinquent might cause your interest rate to go up.
You also have the option of transferring balances from credit cards with the highest interest rates over to cards that have superior terms. In fact, many consumers end up applying for credit cards with promotional low interest rate periods simply so that they can save money on interest. If this is the approach that you choose to take, you should still continue to use any credit cards that you want to keep open or else they could be closed for lack of activity.
Visit this online credit card comparison guide to get the best low interest credit cards!
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