The best deal possible on credit card rates is zero percent interest. This deal is available as a promotional rate, not as a permanent rate, meaning that the rate will go higher at the end of the introductory period. There are several cards that currently offer a zero percent promotional rate, including the Discover More Card and the Discover Open Road Card, which feature zero percent interest for 15 months and the Blue Sky Card from American Express, which features zero percent interest for 12 months.
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In terms of permanent interest rates, it would be tough to beat the 7.25% permanent interest rate you would find on the Iberiabank Visa Classic Card and the Simmons First Visa Platinum. There are a few other cards that come close, with interest rates from 7.5% to 9.99%, including the Iberiabank Visa Select Card, the Simmons First Visa Platinum Rewards Card, the Iberiabank Visa Platinum Card, the Iberiabank Visa Gold Card, and the PenFed Promise Visa Card.
Introductory Rates Make Credit Cards Attractive
Promotional or Introductory rates are perks offered by credit card companies to attract new customers. They usually last from six months to 18 months and are quite low, sometimes even zero percent.
After the promotional period ends, the interest rate would jump to whatever the normal rate is for that card.
An introductory rate can be quite helpful when purchasing a large item, as it can allow you to buy it and pay it off without ever paying interest, or at least paying low interest. It can also provide a financial breather, allowing you to put some debt on a low interest or no interest card while you pay down higher interest debt or deal with financial emergencies.
There are, however, dangers to even no interest promotional credit card rates. Finance Globe points out that the biggest mistake that is often made with these cards is not paying enough of the balance off each month, leading to a big balance at the end of the promotional period that you are unable to pay off before the higher interest rate kicks in. In other cases, someone might keep running up the charges on the account, run into other financial problems or simply forget when the promotional period ends, all of which would lead to having a big balance charged at a high interest rate when the introductory period is over.
Credit Cards Can Affect Your Credit Rating
Credit cards are very helpful in building your credit rating, but they can also tear it down very quickly. Making purchases on a credit card and paying down the balance every month on time improves your credit rating. Paying late or missing payments on a credit card will hurt your credit rating.
A major factor that determines your credit rating is your debt to credit ratio. According to Investopedia, the ideal ratio of debt to credit is 30% or less. This means that it would be a good idea to have a few credit cards with a high limit, but not charge too much on them, preferably less than 30% of the limit, to achieve ideal credit.
Some people think that closing unused credit accounts helps their credit rating, but because of the aforementioned debt to credit ratio, closing unused credit accounts might actually hurt your credit rating. Another thing to keep in mind is that the length of time credit account is open can affect your credit rating, so it’s not a good idea to close the accounts that you’ve had the longest.
Credit Cards Have Many Uses
In this day and age, it’s hard to imagine people not having a credit card, but 24% of Americans don’t, according to Investopedia. Those people probably are having a harder time doing things like renting a car, getting a hotel room, or shopping online, because those are all things that are made much easier with a credit card.
There are very few places that do not take credit cards as payment these days, and some that only take credit cards.
Credit cards are ideal for situations that require a deposit, like renting a car, since the same card can be used to pay a $30 rental fee or $2,000 in damages. Credit cards are perfect for long distance transactions by phone or internet since all you need to complete the transaction is the account information, no physical exchange of money is necessary. Credit cards also make it easier to buy gas, rent movies, and pay for parking in a parking complex, thanks to self-service terminals.
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