With today’s high cost of living, consumers are looking for ways to cut corners. Switching to low-interest rate credit cards is a great way for consumers to increase their buying power while saving money. Here’s how.
Interest Rates
If you plan on carrying a balance on your credit card – and who doesn’t these days – then the interest rate associated with that card becomes extremely important. The higher the rate, the more you will have to pay for using the card for your purchases.
Think about it; when you purchase a $1,200 TV using a credit card with a 24% APR, you will spend $576 in interest if you pay off that purchase over two years. If you purchase that same TV with a low-interest credit card that has an APR of 11%, you will spend just $264 in the same period. That’s a savings of $312. Now, apply that savings to all of your large and small purchases, and you can see how low-interest rates credit cards can save you money.
Balance Transfers
You can also save money with a low-interest credit card if you use it for balance transfers. A balance transfer is when you use your low rate card to pay off your high-interest rate credit cards. This can save you big money depending on the rate of the card that you are paying off. As demonstrated by the above example, cutting your APR in half can drastically cut your interest paid overtime. Credit cards with low interest not only save you money in the long run, but they can also free up cash every month. Minimum payments are based on a percentage of the total you owe on the card. A lower interest rate and a resulting lower balance equal lower monthly payments each month.
Pay Off Debt Faster
Low-interest credit cards make it easier and faster to pay off your credit card debt. As previously mentioned credit cards can be used to complete balance transfers. When you transfer balances from your high rate cards, your debts will get a lower interest rate. So if you continue to pay the same amount each month that you were paying under the higher rate cards, your debts will be paid in full much faster.
For example, say you had a $1,000 balance on a 21% APR card. Minimum monthly payments for that card were $40; making just the monthly payments would mean that it would take you 7 years and 11 months to pay off the card. If you were to do a balance transfer to a low-interest credit card with an APR of 9.9% but continued making the same $40 monthly payment, you would pay off the debt in 6 years instead. That’s paying off the debt almost 2 years earlier while still saving big money.
So, what are you waiting for? Get rid of those high-interest rates and start saving!
