Those looking for low credit card rates are wary of the too-good-to-be-true offers that end up costing more money than they promise to save. After all, most of us just want a straightforward card with simple rules.
But then along comes a card offering a 0% introductory APR for the first two years. A balance transfer to this card could save hundreds of dollars in interest and help you pay off debt — so what is the credit card company hiding? What happens after the two-year introductory period?
These are questions that ensure you don’t make a counterproductive move when looking to low-interest rate credit cards to pay off debt. Consolidating debt is a good idea, but don’t get caught paying ridiculous fees, wasting the 0% interest period or missing the opportunity for better low fixed interest credit cards .
Balance Transfer Fees and Annual Fees
Just because a card offers a long 0% introductory APR period doesn’t mean the other features of the card are desirable. Many of these cards have annual fees to offset the benefit of saved interest.
A second consideration is a balance transfer fee. This is typically 3 percent of the balance being transferred, so watch out when transferring a large balance. Slate from Chase offers a 0% introductory APR for 15 months with no balance transfer fee in the first 30 days and no annual fee. Take advantage of this and other deals with no balance transfer fees when consolidating debt.
Big Purchase or Consolidating Debt
Perhaps you don’t usually carry a balance, but you see the opportunity to make a big purchase using low interest rate credit cards. A 0% introductory APR offer can essentially serve as an
interest-free loan for six months to two years. The problem is that whether you’re using the balance transfer card for making a big purchase or consolidating debt, the introductory period may not be long enough for you to knock out the entire balance in time. That’s why it’s never a good idea to sign up for a 0% introductory APR credit card without having a plan.
The 0% introductory APR period can provide relief from high interest rates and a chance to pay it off, but these good intentions can quickly turn into a further motivation to spend during this period. Card companies count that temptation to increase your balance during this period to beyond what you can fully pay. When making a payment plan, it is easy to forget that any excess spending each month is added to the balance.
Additionally, variable APRs after the introductory term can easily be higher than those on traditional cards. You don’t want to transfer a $10,000 balance from a 14.99% card onto a 0% APR card for six months, pay it down to a $9,000 balance, and then have the card jump to a 21.99% APR. The key to a successful balance transfer is the resolve to pay it off quickly. The resolve to pay it off quickly takes a concrete payment plan.
Low Fixed Interest Credit Cards vs 0% Introductory APR
Those who are tired of dealing with fees and changing rates will like the sound of low fixed interest credit cards for paying off a balance. Although these cards make up only 30 percent of the credit card market, they may come with an average APR of 9.9%. Are these cards better for paying off a large amount of debt?