Low Interest Credit Cards

Got an excellent credit rating? Chances are that you have received plenty of mail offering low interest credit cards. Consider a low interest card a reward for always paying your bills on time. Your excellent credit rating can shave hundreds of dollars off your monthly credit card bill.

You may even get these offers if your credit rating is less than perfect. But read the small print carefully and you will probably find a clause that says the company may offer you a different type of credit card (with a higher rate) if you do not qualify for the low-rate card.

But don't despair. In these days of low interest rates and high competition, you may find your existing card company will lower the rate on the card you have rather than lose you as a customer. Of course, you should always keep an eye on your credit agency reports and question items with which you disagree.

Clear winners
People who normally carry a balance on their credit cards are clearly winners with low interest cards. If you don't carry a balance, it doesn't matter what the interest rate is.

Not paying close attention to the interest rate charged can result in higher debt than you need to have. Look at it this way: how much sooner would you be able to pay off your outstanding balance if you had an extra $100 or $200 going to pay off the principal each month? That's how much you could save in interest with a low interest credit card.

Whether that extra money goes to the credit card company or to reducing your debt is up to you.

Paying credit card bill not enough
But getting a low interest rate is one thing; keeping it is another. Think that paying your credit card bill on time every month will be sufficient? Think again! All your bills need to be paid on time. A few days late with the phone or power bill because you were on vacation could be enough to jump your interest rate from, say, 3.9% to 29.9%. Carry a large enough balance and that could add thousands of dollars in total interest payments over the course of a year. On a $10,000 balance, the additional cost would be more than $200 a month.

It can't be said often enough: read the fine print. Credit card contracts, in fact most contracts, are in such small print and legal language that consumers often fail to read them or to understand them fully. But these clauses and conditions are required to spell out all the details involved in the use of your credit card.

Can rate be increased?
Look for ways in which your juicy interest rate can be increased. And look for fees that can be added, for example: for late payment (which might also increase the rate you pay), or for exceeding your credit limit. Anything that increases your cost of borrowing in effect increases your rate of interest, even if it goes under a different name.

Your peace and security could depend on your careful reading of every word in the contract. If there's something you don't understand, get it explained.