Using Low APR Credit Cards

What is an APR?  APR stands for the “annual percentage rate”, or the rate of interest that the credit card holder shall pay whenever he or she acquires a monthly balance, transfers a balance from another card or takes cash advances.  A credit card’s APR is usually totaled monthly based on the current card balance.  Some credit cards offer a 0% APR as an introductory rate for new customers which may last from six months to a year until a another APR takes effect.

People who have problems with bad credit, especially those who own multiple credit cards, are often burdened by bills that have accumulated due to untimely payment and high interest rates.  One good way to get out of debt is by transferring the balance of a high interest rate card into a credit card that offers low or zero APR. This way additional costs from high APR creditors is avoided and only the actual balance is left unpaid.

Of course, it is understandable why most people would prefer a credit card that has lower APR over a higher one.  If you are considering on applying on one, here are some things you should know about:

• Credit Cards with low APRs may surprisingly include higher annual fees so be sure to ask your credit card issuer about it.  
• An interest rate advertised as "fixed" can change with an advance notice from the credit card issuer.  This means the original APR when you signed up can increase after a time period specified.
• A good credit card provides not only low APR but offers rewards as well such as travel miles, fuel savings, cash rebates and other perks. 
• Make sure that the credit card provides a grace period that lets you pay your bill at the end of the month without extra charges.  Some cards begin charging you interest the same day your purchased was made.
• Even if your credit card allows grace period for purchases, be careful of the interest rate spike associated with making cash advances. Typically cash advance interest rates are around 18%

Just because a credit card is offering a low APR doesn’t immediately mean, it is the best choice for you.  Make sure you understand all terms and conditions included in the deal.  If there are points that are not clear to you, don’t hesitate to inquire about them.  Be careful in rushing into an offer just because of attractive perks or discounts advertised.  Some of these deals might not even be suitable for you.  You may find that you’re not really benefiting from the advantages you signed up for simply because it doesn’t suit your lifestyle. 

If you already own a credit card or two, it might not be a good idea to call your current card holders and see if they have any rate specials.  If so then do the “balance transfer shuffle” and move high interest rate balances onto the lower rate card. 

If they do not have anything available to you, or claim these special interest rates are good only for new customers, its time to sign up for another credit card.

Remember, the more credit cards you have on hand, the more chances you have to overspend.  So stick with the one you already have, and focus on paying your bills on time and keeping track on your account regularly.  This way surcharges from over due bills are prevented.  More importantly, you will have more control over your credit cards and the debt associated with credit cards.  With careful planning and maintaining a careful eye on your interest rates you could start down the road to becoming debt free.

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About the Author Liz Roberts is a loan consultant with NewHorizon Finance and has been providing consumers and business owners with financing since 1989. Bad Credit? Join our free credit repair mailing list for tips on building and repairing your credit yourself, without hiring a credit repair service. Click here for a list of bad credit unsecured credit cards Free reprint rights with full credit to the author. Please reprint everything within this box. Copyright 2007