Using introductory rate credit cards has become a popular way for UK borrowers to manage credit card debt. Introductory rate credit cards offer borrowers a preferential interest rate when they first sign up for a new card. There are three main ways in which this can happen. All of the ways offer significant advantages for credit card borrowers.
0% Balance Transfers
The one that is most appealing to consumers is the 0% balance transfer offer. This offers a nil rate of interest on balances transferred to a particular credit card. There is usually a limit to how long this offer applies, but this can vary from three to 12 months, so most people will be able to find an offer that suits them.
The trick to using 0% balance transfers effectively is to move balances from card to card before the expiry of the offer period. This is known as rate surfing. Credit card companies don't like it, because it loses them hundreds of thousands in interest. For consumers, however, rate surfing offers the chance to clear some or all of an outstanding debt. This is because payments to 0% cards reduce the debt each month instead of being applied to interest.
Fixed Low Balance Transfer Rate
Another typical introductory credit card incentive is a fixed low interest rate for the lifetime of a balance transfer. That means that the lower interest rate will apply for as long as the debt remains on the credit card. For example, if the standard variable interest rate is 13.9%, a credit card issuer might offer a reduced rate of 4.9%.
This is a good option for borrowers who have a loan or debt on which they are paying a higher interest rate. Transferring to this kind of deal can save consumers hundreds of pounds and can help them to repay debt more quickly. With this kind of deal, there is little advantage to rate surfing unless another card issuer is offering a better preferential rate.
Permanent Low Rate
A third type of credit card incentive offers a low rate on spending on the card. This is usually a few percentage points below the standard variable rate. This type of offer can be a good option for consumers who spend regularly on their credit cards. This is because most balance transfer offers have higher rates for other types of transactions such as purchases, cash withdrawals and credit card cheques.
Other Features Of Introductory Rate Credit Cards
As if low rates were not enough, many credit card issuers offer other incentives to new customers. These include: - the ability to contribute to charity by using a particular credit card - discounts off purchases from particular manufacturers - cash back on purchases - additional insurance on purchases or travel
Many credit card companies have got wise to rate surfing and now apply a one-off charge for balance transfers. It is worth shopping around to get the best combination of interest rates and other incentives.
In addition to making purchases on your credit card you can also use the card for cash advances, although this should be avoided wherever possible as the charges and fees can be very high.
Many people now prefer using credit cards to having to carry around cash or pay by cheque, and with such a choice of credit cards available it is not difficult to find one to suit your needs.
It is important to remember that you need to choose the right credit card in order to truly benefit from credit cards, and the card that is right for you will depend on your needs and circumstances.
It is also important to ensure that you compare a range of cards in order to find the right one for your needs, and this can be done quickly, easily, and conveniently using the Internet.
Amongst the popular types of credit card that are available these days are:
Balance transfer cards
The balance transfer credit card is designed to enable you to transfer balances from other expensive credit cards and enjoy a period of 0% interest or low interest.
With the 0% interest balance transfer card you will normally be charged a fee for transferring your balance, and you will have a fixed period within which you have to pay off the transferred balance before you start getting charged interest.
With a low rate balance transfer card there is no transfer fee, and the low rate is generally applied for the life of the transferred balance, giving you more time to repay the balance without being hit with extortionate interest charges.
0% purchase credit cards
A 0% purchase credit card is ideal for those that want to use their card to make purchases and wish to spread repayment of their balance over a period of time.
With a 0% purchase credit card you can enjoy a specified period of interest free credit, and providing you repay the balance within that period you will not be charged interest. The 0% does not apply to cash transactions or cash withdrawals however, so these should be avoided.
Rewards based credit cards
A rewards based credit card is best suited to those that use their cards regularly and repay the balance in full each month, hence do not get charged any interest. By using the card regularly to make purchases you can accrue rewards such as cash back, air miles, rewards points, etc.
By repaying the balance each month in full you will also avoid paying interest, so in effect you will actually be making money or earning rewards for using your card without that rewards being offset by the interest that you have to pay.
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