Low Interest Credit Cards

According to the British Banking Association, Britons are now transferring more balance between credit cards than ever before.

The association doesn’t release figures on the kind of cards that are being transferred from and to but it’s a safe bet to assume that most consumers using this facility are moving from a high rate of interest to a low one.

Balance transfers are seen as the good guys of the credit card world: they decrease debt, people think, just as fervently as other cards aim to increase it.

To view products in this way during any credible market comparison is a nonsense, however.

All credit card companies are out to make money whether they’re selling 0% balance transfer credit cards or some other sort of financial product.

Does that mean that balance transfers aren’t worth it, that they’re a scam? No, it just means that they’re not always worth it, they’re not a financial magic wand that can be waved over finances to make them ok: they’re much more complex than that and you have to make your transfers balance.

For one thing, for example, there are balance transfer fees.

A standard rate card will have a balance transfer fee of around 3% of the balance to be transferred.

This should be taken into account when working out how long the person doing the transfer needs to pay off the debt in full.

That’s the second problem with most transfers and where many users of plastic fall down.

Fail to pay back the debt in full during an introductory period and within a few months any interest you could have avoided will be wiped out by new interest payments.

Standard rates on transfer cards aren’t high for nothing and this is another way in which this transaction can become seriously unbalanced in favour of a card provider.

Related to : www.fordcredit.com cbsmarketwatch.com

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If you have ever tried to calculate the monthly payments on your credit card or tried to figure out the amount of your monthly minimum payment you would have realized that it is not simple.

Many banks who issue credit cards initially tempt customers with very low rates. After the trail period, these rates suddenly shoot up. In addition, apart from the basic amount due, you also need to consider fees like late fees, annual membership fees etc. The interest rates are also subject to fluctuations. If you have multiple credit cards with different rates of interest and varied fees you can find it really hard to plan out your monthly budget as regard the amount you have to keep aside for credit card payments.

In fact there is a mathematical formula that credit card companies use to determine monthly minimum payments. Some banks calculate payments on the basis of your average daily balance or on adjusted payments, charges and interest rates or in some cases on your previous balance. While applying for a card or even if you are consolidating balances, make sure you read the fine print on the card member statement and see which of these calculation methods is used by your bank.

The adjusted balance system favors the cardholder the most. Under this, the bank adds any new charges to your previous months balance deduct the payments and then multiply that sum with the monthly interest rates. The result is equal to your monthly minimum payment.

The previous balance method on the other hand is skewed towards the card issuer. The bank multiplies the balance from the previous month with the monthly interest amount irrespective of any payments made in the previous month. This means you will be charged on the previous months balance even if you may have made a large payment last month.

The method which is the most impartial to either party is the average daily balance method. Your average daily balance is added to accrued charges as and when they take place. Payments keep getting deducted. The average of the daily totals is worked out and the final amount is multiplied with the monthly interest rate.

It is important for you to go through your card statement every month and calculate the minimum monthly due every month instead of blindly accepting what your bank tells you. The amounts are usually correct but there may be a mistake. So it is always better to check.

Related to : www.bankmercantile.com www.1stsource.com

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There are various ways interest rates are understood. In its simplest form, an interest rate is the percentage of the principal (as the original loan amount is commonly called) charged over a designated period of time, typically a year. In the case of the MP3 player, the interest rate is 15 percent per year.

The real interest rate takes into account the yearly inflation rate (that is, the average percentage increase in the price of all goods and services in the economy). If the average price increase, or inflation, for the year were 3 percent (thus reducing the purchasing power of your money by the same amount), the real interest rate would, in the example, be 15 percent minus 3 percent, as the $115 owed to the credit card company would be worth 3 percent less than when the purchase was made.

Another common term is compound interest. Without compound interest, a $100 loan with a 15 percent interest rate would result in the following amounts due, assuming you made no payments: $115 after the first year, $130 after the second, $145 after the third. In other words, each year the company would charge you 15 percent of the principal. Instead, banks, credit card companies, and other institutions charge compound interest. The first year would be 15 percent of the $100 loan, increasing the amount due to $115; the second year would be 15 percent of $115, boosting the loan amount to $132.25; and for the third year, the amount owed would be $152.09. Each year you would pay interest, or a percentage fee, not only on the principal but also on the interest from the previous year, thus creating “compound” interest. For credit cards, payments are due each month, and the annual interest rate (15 percent in the example) is really a compound interest of 12 monthly interest rates.

Interest rates are also used in such financial services as savings accounts and CDs. CDs, or certificates of deposits, are similar to savings accounts but do not allow any withdrawals for a designated period of time, such as one year. Consumers and businesses open savings accounts and CDs to earn interest on their deposits. If you deposit $100 in a savings account or CD that offers an interest rate of 5 percent, you will have $105 in that account after a year. In this way, consumers and businesses receive interest because they “lend” money to the bank.

Bonds, another form of borrowing money, use interest as well. In order to raise money, governments and corporations sell bonds, which are essentially certificates that promise that the government or corporation will repay the price of the bond, plus interest, after a designated amount of time, such as five years. Government bonds are often called securities. The U.S. government, for example, sells securities to pay for the national debt (when the government spends more than it collects in taxes, there is a debt, which the government must pay). Local governments commonly sell bonds to pay for large-scale projects, such as schools, swimming pools, and jails.

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When looking for a credit card, the first thing you want to look at is the interest rates that certain banks offer with their cards. Of course, this may seem like such an obvious thing to look for but surprisingly, this is what most people tend to forget when scouting for credit card offers. And this is exactly why many people are put into debt so often.

Now, interest rates may not seem like a big deal for you but if you better be careful when making those purchases. In the long run, you will want to wish that you had the lowest rate credit cards because it’s the interest rates that really pile on top of each other to make your debts seem even more difficult to pay off. So the first thing you should do when applying for a credit card is to first compare different interest rates. Check the APRs of different cards in different categories. This will give you an idea about which offers are the best for you.

Next thing to do is to review the terms of the cards that you have information on. Look for benefits like 5% cash back on certain spending categories, 0% APR for 6 months, regular APRs for 9.99% post-introduction, and waived annual fees. And lastly, since you know there is an interest rate, no matter how low it is you should be able to maintain good payments so that you don’t end up with a bill that you can’t pay up in the end.

Related to : www.1stsource.com www.elliottwave.com cbsmarketwatch.com

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From a high interest rate card, you will be making the transition to a card with low interest rate or with zero interest. Usually, you are given six months to a year to pay off your debt.

If ever you feel that it would take you more than the specified months to pay off your debt in full, you can choose to transfer again to another balance transfer card, although hopping from one card to another seems not a good idea.

Some credit card companies call these types of customers as “credit card tarts”, not exactly the nicest term to call you. It refers to frequent switching from one low interest card to another.

Debt and Life’s Reality

Debts should be paid off immediately, we all know that. We should also try to live within our means in order to avoid going into debt, we are also aware of that. However, reality is very different. Even if we are aware of how things should work, somehow, we end up doing what we shouldn’t. We end up getting ourselves into debt.

A zero percent interest balance transfer card can assist us in paying our debt minus the interest. In case you have a low interest type of card, you still avoid paying interest for several days, usually up to 55 days. But this only works if you keep your card paid off in full each calendar month.

Things to Consider when on a Balance Transfer Deal

Look for cards with a maximum one year offer. Just be sure to keep the card active by making at least the minimum payment and to avoid incurring any penalties.

Keep a clean credit record. In order for credit card companies to approve your application for a zero interest balance transfer card, you need to have a clean financial record. If you have poor records, companies might be hesitant in granting your card application.

You can always transfer from one card to another to take advantage of their zero interest balance transfer deal, but it could make your credit records suffer. If you continue being a “credit card tart”, you will eventually end up lowering your credit score.

Just a Few Reminders

Most balance transfers have introductory periods. When you sign up for one, be sure to note when this introductory period ends. In case you are nearing the end and you still have not paid off your balances in full, you might consider transferring to another card, though you should do this with caution.

Related to : www.aib.ie

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