Getting the Best Low Interest Credit Card for Debt Consolidation
Thursday, May 15th, 2008 Subscribe To Our Feed
A low interest credit card for debt consolidation is one way to solve a financial problem you may have. It might sound crazy, if you are already in plenty of debt, to be getting another credit card. However the aim of this credit card is to put all your existing debts onto the card. In many cases there will be various incentives to do this, like zero interest charged on any debt transferred to the card for the first 6 months. This article will cover some points when looking for the best low interest credit card for debt consolidation.
So there are generally 6 ‘features’ of a credit card that financial institutions use to attract customers. These are :
a deal on the balance transfer,
the introductory purchase rate,
interest rate or purchase rate,
annual fee,
length of period that a purchase is interest free,
a reward program.
It has to be remembered that all these features are aimed at attracting as many people as possible. So they want to offer a reward program to people that are likely to use the credit card often. I would suggest, if you are trying to consolidate debts, that you don’t use it often. In fact, rather than using it, you transfer all your outstanding debts that are on higher interest repayments rates to this card. Then work towards paying off this debt. So a rewards program, like free air miles or money back on purchases, shouldn’t influence your decision on the best low interest rate credit card for debt consolidation.
The same may also be said about the length of time that a purchase remains interest free. This may be a month or 55 days but if you don’t purchase items on this card then it shouldn’t concern you.
I would suggest the important things to look at are the annual fee. Most annual fees are pretty competitive on major credit cards so you won’t find a big difference here. Nonetheless, factor the low annual fees into the mix when you make your decision.
I think a deal on the balance transfer is an important consideration. You effectively want to transfer all your debts that have higher interest rates to this card. If you have a 6 month period when interest is not applied to this debt as part of the conditions to the card then you can save a lot of money. The proviso on this is that you pay off the debts that have been transferred within the period when the interest is zero.
Thus you have to be focused on clearing your debts. Don’t think that because you will not be charged interest on this debt for 6 months that your financial problems are solved and start to use credit recklessly. Six months later you will have a large repayment to find.
The final consideration is the interest rate that you have to pay off any purchases or outstanding debts after the six month period. You may not have paid off all the debt in the six months or you may want to use the credit card for essential purchases. So look for the best interest rate on offer.
When looking at a low interest credit card for debt consolidation, it makes more sense to see it as a loan rather than a credit card that you will use. Work at trying to pay off any debts that you roll onto the card as quickly as possible. In this way you should save money. Once you have cleared the debt then you can use the card as per normal, however try to be prudent when using it. Reckless and impulsive spending probably got you the debts you are now trying to pay off.
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