Are you better off with a low rate APR credit card or one with introductory benefits?
With credit card interest rates going up, low APR credit cards are looking more attractive, and in some cases may even be a better deal than credit cards offering 0% deals on purchases and balance transfers.
Advantages of a low rate APR credit card
While 0% introductory offers on balance transfers and purchases may look great, they aren’t always the best deal.
When the introductory period is over, most 0% credit card deals switch back to a standard rate, meaning you might be better off opting for a low rate APR credit card if you cannot pay off your balance in the introductory period.
One of the biggest advantages of a low rate APR credit card is that you can stick with the same card for longer and still get a good deal, rather than having to switch regularly to take advantage of new 0% introductory periods.
Another thing to be aware of is that switching your credit card regularly might have a negative impact on your credit report, which could make it harder to get a credit card in the future.
Sticking with one low rate APR credit card, rather than switching regularly means that you could save money by avoiding paying balance transfer fees more than once.
The added expense of paying frequent balance transfer fees could cancel out the benefits of switching to a credit card with an interest free introductory period, so it makes sense to work out if you could save in the long term with a low rate APR credit card.
Is a low APR credit card right for me?
Low rate APR credit cards are useful for people who usually pay off their credit card bill in full each month, but who may carry a balance over occasionally, and don’t want to pay over the odds in interest if they do.
You need to have an excellent credit rating to be eligible for some low rate credit cards, so it’s always a good idea to check your credit report before applying.
0% balance transfer credit cards are good for consolidating your debts, or if you have a big balance to pay off.
They can give you a break from interest payments and a chance to start paying off your balance.
However, remember that when the interest free period is up, you will start paying the credit card provider’s standard rate or alternatively you could switch again – meaning you might end up paying balance transfer fees (usually 1-3% of the balance) all over again.
By staying with one low rate APR credit card in the long term, you could end up saving, by avoiding paying high interest or paying balance transfer fees more than once.
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