Pay Less to Carry a Balance With a Low Interest Card
Below is a MRR and PLR article in category Finance -> subcategory Credit.
Pay Less on Your Balance with a Low-Interest Credit Card
Summary
Cut down your interest charges significantly if you carry a large balance.Article
Low-interest credit cards come with lower Annual Percentage Rates (APRs) compared to most other cards. While they might lack certain features, there are some that offer both great rewards and low rates, especially if you have excellent credit.
Typically, low-interest cards offer a 0% APR for up to a year, followed by a standard APR between 11% and 16%. For instance, the Chase Platinum Visa card provides 12 months of 0% APR and a standard APR of 14.24%, with no annual fee. While there are cards with even lower APRs, they often require very good to excellent credit. Some recent offers have extended the introductory period to 16 months, offering even more savings.
Now, consider a rewards card like the Hilton HHonors Platinum Rewards American Express. It offers great benefits for travelers, with a 2.60% introductory APR for six months, after which the rate jumps to 18.24%.
If presented with both options, many might choose the Hilton HHonors card due to its exciting rewards, but this can be a mistake. Accumulating rewards points is enticing, but if you carry a large balance each month, a higher interest rate can negate the savings from rewards.
If your monthly balance is low, a low-interest card might not provide significant savings. For instance, the difference between a 15.99% APR and a 10.74% APR is minimal on a $300 balance. In such cases, a rewards card might be more beneficial. However, if you carry a higher balance, a low-interest card is the better choice.
When choosing a credit card, the interest rate should be your main focus. I always look at the regular APR after the introductory period in any card advertisement. The interest banks charge is their way of making money, so understanding the APR is crucial, regardless of other features the card might offer.
You can find the original non-AI version of this article here: Pay Less to Carry a Balance With a Low Interest Card.
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