Credit cards today have become a double-edged sword, on the on hand allowing you the convenience to for example shop online and on the other hand providing you with the opportunity to run up so much debt that you are struggling simply to meet your interest payments each month. Like everything else however a low interest credit card is merely a tool and the secret lies in how you use that tool.
Most people today have a credit card and indeed many people have several credit cards and have also accumulated more debt on their cards than they would like to admit. Knowing this the fiercely competitive credit card companies now offer a range of low interest credit cards to tempt us further and many people are enticed by the multi-million dollar advertising which accompanies these card offers. But should you be tempted?
The first thing you will find is that low interest credit cards are not being made available to everyone and generally speaking will only be issued to people with a reasonable good credit history and credit score. Whether or not you will qualify depends on your own personal circumstances and the particular lender whose card you are considering and the only real way to know is to actually apply for a card and see what happens. However, even if you are accepted there are a number of things you need to watch out for.
Although your new card may offer you a lower rate of interest on any balance transferred to the card it is very rare for a lender to actually offer to reduce the principle sum which is transferred and so your new card will still leave you with the same amount of debt that you had on the day you acquired it.
So, now you have your original debt but, instead of paying it off at 12% you are paying it off at only 9%. Sounds great doesn’t it? Well, if you are struggling to meet your payments today it can certainly be helpful in the short term but in the longer term it could well cost you a lot more. The problem here is simply that when you swap your card for a lower interest card you also tend to extend your repayment horizon and a debt which you were originally on target to pay off at 12% over two years now becomes a debt that you will pay off at 9% over three years. When you compound up your interest payments on a monthly basis you will invariably find that by the time you have finished you will actually end up paying back more rather than less money to the lender.
If you are struggling to meet your monthly payments on your credit cards then it can certainly be a good idea to transfer your balance onto a card with a lower interest rate. However, the secret is to remember that your monthly repayments represent both interest on your borrowings and repayment of the principle borrowed. Reducing your monthly payments is fine but, if you are going to do this, then you also need to make sure that part of the money you are saving each month is not simply spent but used to pay down the principle on your card so that you are not simply extending the life of your debt.
Credit card debt is a complex subject and one which runs a lot of people into trouble these days. Remember that a low interest credit card is not in itself the answer to the problem of settling credit card debt but is just one of the many tools available to you.
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