Using Low Interest Credit Cards to Pay Down Your Debt
Making use of low interest credit cards to pay down your debt can be a useful way to manage your money. This entails taking a large credit card balance and transferring it to a card with a low interest rate, usually one you obtain on a special introductory rate. This rate is fixed for a limited time so you have to repay the debt before then.
This can work well for many people caught in the debt trap but there are a few questions you should ask before you make the leap. If you aren't careful you could incur fees and interest rates even higher than the ones you were trying to avoid! So what do you need to look out for when you apply for a low interest credit cards
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Important questions to ask when you apply for a low interest credit card are:
1. When does the special low introductory rate expire?
2. What will the annual percentage rate (APR) be after the special rate expires?
3. Does the introductory rate apply to transferred balances or only new purchases or are both covered?
4. Is there an annual fee on the card? How much?
5. Ask about late fees and over-the-limit fees on low interest credit cards
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6. Find out if there are balance-transfer fees (transaction fees can be as high as 4 percent). The more you spend, the higher the transaction fee on some low interest credit cards.
Of you are satisfied with the answers to these questions read through the credit card offer again. Try to understand what the jargon means. Take the example of an offer that states that fees are waived for initial balance transfers only. This means that only the transfers that are authorized when the customer accepts the card and completes the balance transfer form are exempt from fees. Any other transfer on these low interest credit cards is subject to cash advance fees.
It is important to note that you may not qualify for the super-low rate. The offer might tease you with a low rate which you are not actually eligible for. Make sure you know what you are doing here as you may be duped. And what happens if you default on low interest credit cards? You might lose your low rate after only one late payment!
If you are happy with the terms of your new card go ahead and fill out the paperwork to transfer the balance from your old card to the new one. Then cancel the old card and pay the new one off responsibly. Low interest credit cards are as good for managing money as you are, so make sure you use it wisely!
