14 Aug 2020, Author:

If you have stumbled upon this article, then you must be considering getting a credit card with a low interest rate. Unlike other credit cards, low-interest rate credit cards (as the name suggests) have interest rates ranging between 10% and 15%. When you pitch someone the idea of a low interest rate credit card, they will be intrigued immediately and think of it is an excellent option. A lot of people just go for it without thinking too much, but that is not how it should be done. There is no doubt that low-interest rate credit cards are a good option, but they are not for everyone. Just like all other things, a low-interest rate credit card has its pros and cons as well. And you should go through them before making a final decision.

People turn towards low interest rate credit cards when they are facing financial problems and don’t have cash on them. A lot of people end up in bad credit situations, and they need means to pay off the debts.  These credit cards let them shop for essentials and allows them to pay back when they can. However, in financial situations like this is not the only way that can provide your assistance. Nowadays, there are so many options available out there that can help you out of financial trouble. There are several different types of loans out there like short term personal loans, payday loans, and guarantor loans that can help you solve your financial problem. Which options a person should go for mainly depends on the situation of that person. So to make things easier for you, below, I have mentioned a few pros and cons of low interest credit cards. After reading this, you will be able to decide whether they are suitable for you or not. Let’s have a look:

 

Pros:

Following are the benefits you can enjoy from a lower interest rate credit card:

Save Money on Interest rates

The biggest advantage of low interest rate credit cards is that it allows you to save a significant amount of money on the interest payment. If you are someone who is highly dependent on credit cards and makes the payment from month to month, then this can be very helpful for you. For example, on the normal credit card, you will be getting an interest rate of 25% on average, but with a low interest credit card, you can get an interest rate as low as 10%. This means you can save more than 50% on your interest rates and can add more money to your savings.

Affordable Yearly Rates

Another advantage of low interest rate credit cards where it lets you save a good amount of money is the annual fee. For regular credit cards, the annual fee can get as high as $150, which is quite expensive. But with a low interest rate credit card, you only have to pay a small annual fee. Most of the companies out there that provide low-interest rate credit cards charge something in between $0 to $30, which is a pretty small amount if you compare it to $150. 

Makes it Easier for You to Pay Current Debt

If you already have a credit card debt, then this can help you immensely. Switching to a low interest rate credit card can help you make your payments on time by allowing you to spend money without worrying about the interest. There are a lot of low-interest rate credit card companies out there, and some of them provide you with a 0% interest rate, which can help you solve your short term debt problem. However, the interest on those credit cards rises after a certain point and can go up to 20%.

 

Cons:

Now, as you have looked at the benefits of low interest rate credit cards, let’s take a look at some of its drawbacks as well.

The Trap of Low Interest Rate

People go for low-interest rate credit cards happily, but what they don’t realise is that if it’s not managed properly, it can turn into a trap. One common mistake a lot of people make is that they don’t submit their payments on time because they think the interest rate is very low, and they just let the debt pile up. This is not a smart decision at all because if you let the debt pile up, it will reach a point where you would not be able to control it. This where short term loans like personal loans or even emergency loans are a better option as you have to use them one time and don’t get addicted to them.

Forget About Rewards

If you are used to credit card shopping and are thinking of switching to low interest rate credit cards, then keep in mind that you will have to say goodbye to all those rewards as well that you were getting with the card. All the perks you can enjoy on a regular credit card will not be available on this one. Your benefits are very limited, and there are no possible ways to earn rewards on spending.

Fee on Balance Transfers

As mentioned in the pros, getting a low interest rate credit card is a great way of paying off the debt you have piled up from the previous credit card. It does sound like an amazing offer, but it has a catch too. When you get a low interest rate credit card to pay off another credit card, you go for a balance transfer, and for most of the low interest rate credit companies, a balance transfer isn’t free. You will have to pay an extra fee; otherwise, you would not be able to pay for it. 

Cash Advance Are Expensive

You can shop all you want with a low interest rate on these credit cards, but if you go for a cash advance, you will have to pay for that. The interest rates on cash advances are different, and if you want to withdraw cash, then you can end up paying up the interest rate you were avoiding in the first place. So, it is recommended you consider other options like payday loans in such a scenario.