Regardless of whether you need to amalgamate your existing debt into one low monthly payment, or are simply looking to rebuild your credit rating and start anew, using a low-interest credit card has a number of immediate advantages that can help you rebuild your credit and or pay off your balances. So, what are some of these advantages and what can you expect from using a low-interest rate credit card?
Lower Interest Rates Mean Lower Interest Charges
Having a low interest rate credit card means more of your monthly payments go to paying down your outstanding balance. For instance, if you were carrying a balance of $2,000.00, and had an annual interest rate of 10 percent, then your monthly interest rate charge would be $200.00 divided by 12 months, or $16.67. Now, compare this to an annual rate of 7 percent and you’re only paying $11.67 a month in interest which is a savings of $5.00 a month or $60.00 a year. In the end, a lower interest rate means more of your payments go towards bringing down your outstanding balance.
Benefit from Smaller Monthly Payments
Lower interest rate credit cards allow you to benefit from lower minimum monthly payments. While it’s always best to pay off your credit cards as soon as possible, it’s also well-understood that sometimes you’ve no choice but to carry a balance from month-to-month. Ultimately, your lower rate credit card means you’ll be able to take advantage of those months where you’ve come across an unforeseen emergency and have no choice but to only make the minimum monthly payment.
Faster Repayment Periods
A lower rate means it will take you less time to pay down your balances. Again, referring to our aforementioned example, having a lower interest rate of 7 percent as opposed to 10 percent allowed you to save $60.00 a year in interest charges. That $60.00 could easily go towards paying down your debt faster as it’s not being absorbed by exorbitant interest rates. So, with lower interest rates, more of your money goes directly to paying down your balance.
Improved Credit Rating
Ultimately, having a lower rate credit card means you have a better chance at building up a solid credit rating. You’re paying off your outstanding balances sooner and are able to respect the conditions of your credit card agreement, all because your rates are lower and payments are easier to make.
Debt consolidation is never a simple process. It involves amalgamating all your debt into one monthly payment. When interest rates are high, that repayment period is extended. When interest rates are low, then the prepayment period is shortened. Ultimately, you want to get rid of your debt as soon as possible and a low interest rate credit card helps you do exactly that.
Do not be afraid to comparison shop. There are a number of low interest rate credit cards available. Make sure you understand the conditions set forth in the agreement and how the interest rates will be applied.