When it comes to applying for a credit card, you want the lowest rate possible. But you should be cautious.
There are actually many factors that you should consider to see if a credit card offer is truly a good deal. Remember, credit card companies expect people to focus on that great low rate, so they use this to their advantage. Cheap credit cards can actually cost you more in the long run.
The first thing you should always do before applying for a credit card is get out your reading glasses. Sit down and find the fine print. Start reading.
Look at the finance charge calculations. The rate may appear low, but the way it is calculated could affect what you are paying. Most cards use the Average Daily Balance Method. This is the method you want.
Watch out for the Two Cycles Average Daily Balance method, which can be costly if you carry a balance on your credit card. And chances are that you will. With the Two Cycles method, finances charges are calculated twice during your billing cycle, instead of just once. While the APR is low, this method means that your finances charges will be charged twice.
The grace period is also an area you should read carefully. This is the amount of time you have to pay back what you have borrowed before the finance charges start to accrue. The longer the grace period, the less the finance charge will be. You want to at least have a 20 day grace period. Anything shorter is unacceptable.
Many low interest rate credit cards come with annual fees. This makes up for the low interest rate. It usually isn't worth it. There are cards out there that don't have annual fees and still have low interest rates. Shop around a bit more before you commit. If you decide to go with the annual fee card, compare the annual fee to the amount you will save in interest. If the fee is greater than the savings, it isn't worth it.
The key to getting a good, low interest rate is really reading the fine print. This is just like a contract, and there are things that you must know in order to make the right decision. And keep in mind that the low rate can, and probably will, go up over time. Look to see what the default rate on the card is and when it sets in. There are many cards that will hit you with the default rate as soon as a payment is late. It can even be late by just one day, and you will pay the default rate. Many will hit you with an even higher interest rate if you are every late an additional time.
Low interest rates are essential in paying off your credit card debts. I think that you should always strive to find the lowest rate possible. But be cautious in the search. There are many ways to trick consumers. Don't fall for them.
