4 of 9

Write now Article Tools

Credit cards can be a powerful financial tool. Proper credit card use will increase your credit score and will improve your credit report. This in turn translates into more loan approvals and better loan terms. In addition to loans, a good credit score can help you get better credit cards and can even help you get a job. Even though a credit card can do all of these things, you do not have to pay high interest rates when taking advantage of the benefits of a credit card. As such, you should look into obtaining low interest rate credit cards in order to save money and utilize credit.

Even though low interest credit cards will save you money by way of lower interest payments, low interest credit cards can have some pitfalls attached to them that an inexperienced credit card user can fall into if he/she is not careful. One of these traps is an adjustable rate credit card. You will notice that some credit cards state that the interest rate is 7.5% (a great interest rate) as an adjustable rate. The problem with an adjustable rate is that it can change. In fact, the rate will change and most likely will become higher. Therefore, even though you obtained the card at a 7.5% interest rate, you may end up paying a 10% interest rate or more. Granted, a 10% interest rate is not terrible, but it is not the 7.5% interest rate that you should be paying.

Another issue of which you need to be made aware is an annual fee. If you have a low interest rate credit card, you have to make sure that there is no annual fee on the credit card. A low interest rate is good, but not if you have to pay for the benefit. Remember, your credit score dictates which credit cards you qualify for and as such, you should not have to pay a credit card company if you have a good score. The point is, avoid a credit card with an annual fee even if it has a low interest rate.

These are two of the most common traps that accompany a low interest credit card. Therefore, you should avoid these traps whenever you encounter them. In the worst case scenario, you could end up having an adjustable rate and an annual fee. Therefore, even if you started with a 7.5% interest rate, you could end up with a 10% or more interest rate and a $25 to $50 or more annual fee. If this were to occur your low interest credit card no longer looks like a good deal. Therefore, you have to be able to identify these traps before obtaining a "low interest" credit card so that you can avoid such traps.

Learn more about this author, Marco Angioni II.
Click here to send this author comments or questions.

Add your voice

Know something about The truth about low-interest credit cards?
We want to hear your view. Write now!