Debt can make consumers rather desperate in finding help. Credit companies tend to prey on this fact, and offer enticing low rate credit cards in exchange for a consumer's business. The truth behind this action, however, is that these credit cards can create more debt than they seek to solve. The trick is to weigh the benefits, and call credit companies out on their tricks.
Obtaining a 0% interest rate credit card is easier than one might think. It can be as easy as having a mailing address, where credit card companies will very commonly send such offers to hundreds of thousands of possible applicants across the nation. While this can benefit consumers, it will be more likely to do harm to those who have vast amounts of debt as the low interest rates will commonly be subject to change.
Consumers can benefit from a 0% interest rate card, if they are responsible enough and time permits ample payback options. It can be as lengthy as a year before high interest rates start to kick in, so consumers can switch their debts over to this new credit card and benefit from it if they can pay the debts off before then. Otherwise, they are likely to lose money on the deal and end up paying more.
To get the best deal, and ensure no tricks are imposed, a borrower will need to review every aspect of a contract before signing it. Without researching the contract, borrowers may be subject to hidden fees and deceptive tactics that can put them further into debt than they already are. This is usually best remedied by finding a lawyer or financial consultant to help.
Those who think they can cheat the credit companies are wrong. It may seem like a good idea to switch to a low interest credit card, then leave for another offer from a different company, but this can have negative effects on a borrower's credit score. Anyone who opens multiple credit card accounts and closes them in short periods will be seen as untrustworthy- and this can hurt a consumer much more in the long run.
Responsibility can be the best virtue a borrower can hold when trying to obtain and make use of a low rate interest credit card. Just keep in mind that there is a need for financial advice when doing so, as only a financial consultant will be able to decipher cryptic contracts that will confuse the common borrower.
Closing Comments
As many borrowers will find throughout their experiences, there are far too many tricks and deceptions in the financial industry. Staying clean from any gimmicks and outright manipulative offers is important when one wishes to stay out of debt. The best advice in this situation is to simply find advice and help in companies and government run institutions that cater to helping the individual- and not from the individual's wallet.
They can be used very responsibly and are very handy when buying higher priced items where you would feel uncomfortable about handing over large amounts of cash. Some people feel uncomfortable about carrying large amount of money in their wallets in case they are mugged. Also, credit card issuers offer many benefits such as a certain amount of insurance and consumer protection.
The there are those who can't associate credit cards with real money so go on spending sprees. The result is that they end up with huge credit bills which they cannot afford to pay. This combined with high interest rates can easily make you a financial cripple.
Some people who find themselves in such as situation turn to debt consolidation as a method of solving the problem. We are bombarded with adverts for low interest rate credit cards, telling us how easy it is transfer all our balances onto one single card.
Before you fill in an application form, there some things you should understand about low interest rate credit cards. First of all, they tend to be given out only to those with a really good credit history. For those who have found themselves in a bit of financial trouble and have less than perfect credit scores, these low interest rates will not be available to you.
However, the only way to find out if you'll be accepted for one is by applying and they can be a pretty good long term solution. If you find you are eligible, here are some things you should understand:-
Low interest rate credit cards will not lower the total amount you owe. This means you'll still have the same amount of debt. Actually, you may end up paying more in the long run. If you are paying 8% on a loan of $10,000 for five years you will ultimately pay more compared to 10% on $10,000 for only two years.
This is because of compound interest. If you are paying 8% interest on a $10,000 loan over two years, the amount of interest you pay is only $1074.80. However if you are paying on 8% over five years the total amount of interest is $2165.60. This is obviously a considerable difference.
Remember, when you are told the annual percentage rate (APR), this is what you pay every year and NOT what you are paying in total over the life of the loan.
The only real reason you would consider paying off a debt over a longer period of time is to reduce the monthly amount payable. Over five years the debt above would mean a monthly re-payment of $202.76. This is a much more manageable sum compared to $461.45 per month if you are paying over two years. Make a list of income and outgoings so that you can better decide what amount is affordable to you. There are even online calculators which allow you calculate this easier.
Both Chris Channing & April Kerr are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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