Credit Cards with the Lowest Interest Rates

Discuss anything related to interest rates & fees, like balance transfer offers, low rate cards, annual fees, etc.
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Dont do 0% credit cards

Postby aceinahole » Sat Dec 06, 2008 1:02 am

Typically consumers select a 0% balance transfer credit card as a means of lowering interest on their debt .There are many drawbacks and often the consumer actually builds more credit card debt by doing this. A balance transfer of 3% is always levied from these cards. For example a £5000 transfer means you will be charged £150. You don't have to pay the fee up front - it can be added to the balance. However, this only adds to your debt and gives another opportunity to accumulate more credit card debt.
If you go over your credit limit, miss a payment, pay it late, send a bounced cheque or ask for a duplicate statement you could also be charged. Following an investigation by the Office of Fair Trading, these fees have effectively been capped at £12. When you have a premium credit card that offers enhanced rewards or credit limits you will be charged a additional fee of between £100 and £150 a year. Another important thing to look out for with these credit cards is an order of payments policy, known as a “negative payment hierarchy". Meaning when you use credit card for different purposes and unless you clear your balance in full, card providers will put your monthly payment towards repaying transferred balances before purchases and cash withdrawals. You accrue interest at the highest rate on these transactions. It’s structured so that you won't repay the more expensive borrowing until the cheaper debt has been paid off.
For example, Virgin's credit card offers 15-month interest-free period for balance transfers, but purchases is only interest-free for three months. Thereafter you will be charged the typical rate of 15.9%. Transfer your £5000 debt on the credit card and add 3% considering “negative payment hierarchy”. Your monthly repayments would go towards paying off the transferred balance first and once the three-month 0% offer on purchases runs out, that debt will attract interest at 15.9%. Let’s say you spend on the card as well, making purchases costing £1,000. The sum of the debt is now £6150-6300 at the interest rate of 15.9% or £72-85 monthly; in only four months. Any payments made do not apply to the initial £5000; as soon as that three-month 0% period expires you start accruing interest on the purchases unless you can pay off the whole balance.

I hope you find this helpful :D

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Postby rontan90069 » Mon Dec 08, 2008 3:33 am

true true.

BUT if you pay the bills on time and do everything right even with that 3% balance transfer fee if you transfer the balance once a year that's only 3% interest per year you are paying which is a pretty damn good good deal!

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Postby teddy19 » Tue Mar 17, 2009 9:10 am

The problem you have with always transferring from one 0% to another is the damage to your credit score. Do you plan on buying a new car ever? By all the inquiries and open accounts you can lower your score into a higher interest rate.

I've had clients tell me they have 0% credit cards, but the interest rate on their car loan is 9%. So they have this low rate on $5000 balance, but paying a 9% on a $25,000 car loan. Not very smart in my opinion. Wouldn't tell a client that to their face, but that's what I'm thinking.

As the saying goes there is no such thing as a free lunch.

The other thing you have to be on guard is if miss a payment. For example let's say you transfer all of your debt to one credit card at 0% with a balance of say $15,000 and you miss a payment. Do you think your rate will increase?

This is what the credit card company is hoping for so they can increase your rate. I'm sure you're thinking well I'll just get another credit card at a lower rate. Not likely since now you have a late payment on your only credit card.

It is unwise to put all your credit card debt on one card. Remember there is not such thing as a fixed rate credit card. Go miss a payment and see what happens

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