If you need to carry a balance on a credit card, then it might be better to do this with a low rate credit card. With a low rate card, you will still have to pay interest, but at a lower rate than usual.
A low rate credit card generally has an interest rate that is at least 7-10 percentage points lower than the average APR (Annual Percentage Rate). The lower interest rate that you get with a low rate credit card means you pay less in interest when you carry a balance on your card.
Is a Low Rate credit card right for me?
These types of credit cards usually require you to have a good to excellent credit rating. If you usually carry a balance on your credit card then a low rate card might be the best option for you.
A low interest card may also be a good fit if you’re looking for a balance transfer offer. If your current card has a high interest rate, moving to a card with a low interest rate and a balance transfer offer will save you money.
A low rate credit card may not be a good option for you if:
- You have a low credit score—your application may be rejected
- You don’t carry a balance
- You want to earn rewards (such as cashback, points, etc.)
Types of Low Rate Cards
You’ll find there are different types of low rate credit cards available including:
Intro APR of 0%: this type of card is great if you’re going to make a large purchase and you’re able to pay it off soon. If you pay off the debt before the introductory APR expires, you won’t have to pay any interest on that purchase.
Watch out, though. If you don’t pay the debt off before the offer expires, you could face hefty interest rates. Some cards off the introductory rate for only a specific amount of time. After that, you may find the interest rate jumps to a high interest rate. Be sure to pay off the debt in time and always read through the conditions, so you’ll be familiar with all the terms of the card and not be horribly surprised later.
Balance transfer APR of 0%: many people, who have a credit card with a high interest rate and are carrying a balance, choose to go with a balance transfer credit card offer. These are very similar to the introductory rate of 0%, but here, the balance transfer rate only applies to the balance you transfer, and not to later purchases.
Again, the key for this type of credit card is to pay the transferred balance off before the balance transfer rate ends. Otherwise, you’ll find that you’re an even higher rate of interest than on the previous credit card.
Low ongoing APR: if you will be carrying a balance for quite a while, then this type of credit is the best option for you. Also see if you can find a low ongoing APR card that also has a balance transfer or an intro offer, as this will save you additional money. Be sure to look for a credit card with the lowest interest rate, in order to save money on interest fees.
Tips for Applying for Low Rate Credit Cards
Again, choose a low rate credit card that has the lowest rate, and see if you can find one that also offers an introductory or balance transfer offer.
Keep in mind that the interest rate you’ll be quoted will be based on your credit score. So, the better your score, the lower your interest rate will be. It’s a good idea to check your credit score before applying for any credit card, and then only apply for those credit cards whose requirements you can meet.
Watch out for fees, such as annual or membership fees. These can be quite expensive, so look for low rate cards that have low or no fees.
Low rate cards can be a good choice if you need to carry a balance. Remember to read through all the terms and conditions and compare interest rates before applying for a card. Choose the card with the lowest rate and you’ll save money as you pay off your debt.
For a list of low rate credit cards in New Zealand visit our Low interest credit cards page.