Posted by admin on Aug 30, 2010 in Articles | 0 comments
Virtually every bank or lending institution in the world offers credit cards as one of their many services. But banks, like any business, are in it for the profits. So how do banks benefit from offering you a credit card? From the high interest for the high risk clients to no or low interest credit cards, there is more to the story than meets the eye.
How Credit Card Distributors Make Money
There are two main methods that a credit card distributor makes money. The first, and most obvious, is through interest that is charged on any unpaid balance.
If you think about what a credit card is — a revolving line of credit — you’ll realize that what the distributing bank is doing is essentially pre-approving you for an unsecured loan amount equal to your credit line.
Unlike a conventional loan, you don’t need to provide a reason for the loan nor do you need to provide collateral. And unlike most loans, you can pay a portion of the “loan” off and instantly borrow that amount again if you so desire it.
But like a conventional loan, you pay interest on any amount of the unpaid credit. That interest can be viewed as the equivalent of a markup on a product. In essence, the bank is selling you, let’s say $5,000. That $5,000 costs the bank exactly that amount. So to make money on it, they “mark it up” via interest.
Each day that the loan remains unpaid, you are charged interest at a predetermined rate. For example, a credit card with $5,000 charged to it that has an interest rate of 17 percent will cost you about $2.33 after one day. Now you owe $5,002.33. You are now being charged 17 percent on the increased balance, so the second day you’ll owe a little more.
By transferring a $5,000 balance to a low interest credit card with a 3 percent interest rate, your first day’s charge would be cut down to a measly $0.41. Over the period of a month — the amount of time that typically passes between payments — the savings is much larger. Over the period of time it takes to pay off the entire balance, the savings becomes much more significant.
So why would a bank offer you such a low interest rate on a credit card if it cuts into their profits so much?
There is a second method that a credit card distributor utilizes to make money on credit cards, and that is through a fee that is charged to merchants who accept credit card payments. Merchants pay a processing fee to the various credit card companies for the right to accept credits cards. Part of this fee goes to the distributing bank. In essence, the more you use your credit card, the more money the bank makes.
If you show a record of always paying your bills on time (thus improving your credit score) and use your credit card often, then most banks are willing to give you a lower rate in order to prevent you from transferring the balance to a competing bank.
Having a high credit score gives you the power to demand low interest credit cards, which in turn can save you untold amounts of money. If you are a responsible credit card user, ask your bank to lower your rate. If they refuse, start shopping for a low interest credit card elsewhere.
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Posted by admin on Aug 27, 2010 in Articles | 0 comments
Today, even more then ever before, it has become increasingly inconvenient and very dangerous to carry large amounts of cash with you where ever you may go. Which makes carrying a credit card a simple way to pay your daily expenses without the hidden dangers of carrying cash.
But, the repayment of your charges is not quite as simple as swiping your card through a machine. Although there are many credit card companies out there that offer low interest rate cards , there are slight differences in the different kinds of low rate cards available which will work differently.
Get a Fixed Rate
As always, you should read the fine print when you are shopping for a low rate, a slight difference is the way a card type is being phrased can mean something completely different. When you are shopping for one, select one with a fixed rate.
Although this does not mean the rate stays the same forever, you do get a warning when the rate changes, often a period of fifteen days precedes the actual change rate. A rule of thumb when selecting a card is that the card with a fixed rate is better than that with a variable rate. A variable rate card has a rate that can change regularly and this can really have an impact on your payments and your wallet.
Credit History Factor
It is not only easier to apply for a credit card when you have good credit history but it also makes it easier for you to choose the best low rate. By looking back at your credit history and spending habits you can get a good assumption of what type of card can benefit you better. The first thing you need to look at is how good you are at repaying your credit card debt.
If you have been late with payments in the past then you should looking for a higher interest rate but a lower late fee rate. This type of card could save you money if you have a habit of making late monthly payments.
A good idea when selecting a low rate is to go through all the fees and monthly payments you will have to face. Besides looking at the interest rate, you should also look at the over-the-limit fees and interest on cash advances you might be forced to make. A credit card with a slightly higher rate but more flexible fees in other areas might be a much better choice for you rather than the first low rate credit card that turns up in your mailbox.
Nick Makaryk: Editor, Publisher, and Founder of Best Credit Cards. A Free Consumer Credit Card Comparison site helps consumers find the right credit card while avoiding high interest rates, charges, and no fees. Compare 0% Interest Credit Cards from Visa, Master Cards, Discover, American Express.
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Posted by admin on Aug 21, 2010 in Articles | 0 comments
The low interest credit cards are equivalent to the cheap credit cards that are considered as most famous credit cards due to 0% introductory annual percentage rate. This offer may last 12 months. If you plan to pay full balance off prior to 0% then intro offer expires, and then this tender can be ideal state. If you are carrying balance every month, then low fixed annual percentage rate interest rate may be better option. Selecting 0% intro rate might be the mistake suppose it changes to the high interest charge after promotional offer get expires. This is a cause why it is important to understand what interest rate is after introductory period get expires. The customers who make a decision to go with promotional offer then they can make use of money saved on the interest cost to speed up paying off loan much faster.
The low interest credit cards usually come with the high transfer rates & fees or else interest rates that are higher the prime rate after introductory time. The cash withdrawals might as well have the higher fees. You need to read terms and conditions very carefully. Check all fees & future interest charge prior to signing up. In order to make best use of low interest card, you must make big purchases by using it & pay off balance at time of introductory period. You may finish up paying small interest charge but it will be good than taking store credit for high interest charge. If you have 0% INTEREST rate offer, then you are paying nothing for whole introductory period. By using low interest credit card elegantly during introductory period will definitely assist you save money on large purchases.
What are conditions in order to maintain very low interest?
Even if introductory rate can extend for period of three months to year, interest rate can be hiked rate much superior than prime rate at time of this period. This is usually done seeing you miss out any monthly sum or if you go beyond your credit limit. In order to use benefits of low interest card to maximum, do not let the above situations happen.
Pros & Cons for switching the credit cards
In order to take benefit of low interest cards lots of people switch to credit cards that are rolling on their balances to new ones to keep the interest rates low. And this will absolutely save you money & work your advantage. But switching credit cards may be long process & frequent switching may reflect very badly on your report. Usually you must keep a few long rank accounts with the prime or else low interest charges after introductory period when you switch to other cards.
If you are besieged with the bills and the credit card debts, then why not combine your loans in 1 loan. This can save enormous sum of money on the interest cost. It cam make monthly expenditure more convenient and will alleviate financial problems, which come with having much credit that you cannot afford. This is excellent chance to start process of getting better your credit rank.
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Posted by admin on Aug 18, 2010 in Articles | 0 comments
Some card companies offer low interest credit cards as a means of attracting customers, but believe it or not, these cards aren’t perfect for every person. It comes down to how you use your cards that will determine which is best for you.
Low interest cards may be appropriate for someone who tends to carry a balance from month to month. For these people, the lower interest rate will reduce the amount of finance charges they pay. Keep in mind, however, that some cards charge a very high annual fee in order to cover up for the low interest making it a must for you read disclosures carefully.
Also, the low interest rate may end if you make a late payment, either on the card itself or on another card. This “universal default” clause, where your rate on one card goes up if you’re late on another, unrelated payment, has come under fire recently, but it’s still in many contracts. If you sign one of those contracts, you could find yourself paying the default interest rate—which can be s high as 30%—instead of the advertised low rate. Your only way out at that point may be to close the account and find another low rate card, if you can.
Low rate cards typically do not offer any “extras”, like air miles, cash back, insurance, or rewards points. If those are important to you, you’ll want to compare offers to see which ones provide the features that matter most to you. Affinity cards that can benefit your alma mater or favorite charity are also available. However, you need to check the annual fees as well as the interest rates. Giving to charity while needing a loan to make your credit card payment doesn’t make much sense.
If you don’t carry a balance every month, a low rate card won’t save you much money. You’ll want to compare credit cards on the basis of annual fees, grace period (the time between when the statement is prepared and when the payment is due), affinity, or rewards.
However, there are times when a really low interest card makes sense. Can you open one of these cards and invest the money at a higher rate? Zero-percent cards can make sense in this instance — if the credit card checks are also charged at zero percent. Read the fine print. Purchases or investments made with the checks sent along with your card are not always at the same interest rate as those made with the plastic itself. And don’t forget, you still need to make the minimum monthly payments on time until you cash in your investment and pay off the credit card.
Low interest credit cards can be quite beneficial for two-thirds of Americans who carry balances. They can utilize that low rate to reduce the total interest charges paid while trying to clear the principal balance.
As things like interest rates can change, you have to regularly compare credit cards and look for the one that would suit your present situation. A number of card issuers operate today, and as long as youy payments are on time, you have unlimited options should you want to change.
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Posted by admin on Jul 27, 2010 in Articles | 0 comments
A credit card can be a wonderful thing, at least if you use it wisely. A low interest credit card in particular has a lot of benefits for consumers. Perhaps you still use your first credit card from along ago and never wanted to get another card. You might be quite happy with that old card you’ve had so long, but as a consumer you may be much better off by getting a new, low interest credit card.
There are a lot of credit card companies out there who would like your business and will offer various incentives to try to get you to sign on. The competition is fierce, meaning you are likely to have little or no trouble finding a low interest credit card. However, as always with a credit card, read the fine print before you send off that application.
Your interest rate will be largely determined by your credit history. The better of a credit history you have, the more favorable the interest rate on your card will be. If you have a few minor problems in your credit history, you might still be able to get a lower interest rate than your current card has. Shop around.
Many people carry a balance on their credit card from month to month. If you are one of these people yourself, you can save a lot of money by switching to a low interest credit card. You can pay off your balance much faster with a lower interest rate. Some companies even offer a 0% rate of interest if you switch your balance over to their low interest credit card. With no interest, you can quickly pay off your credit card.
Maybe you are one of those who always pays the balance on your card before it comes due every month. Even if you are one of these people, a low interest credit card can be very useful to you after all, you never know when something may come up which prevents you from paying before the due date. If this happens, the low interest rate is a real lifesaver.
Are there any downsides to these cards? The initial term of a 0% card or low interest card will generally be six months. After these six months, the interest rate usually goes up, sometimes by quite a bit. If you manage to pay off all of your credit card debt by that time, you will have done very well with this card. On the other hand, if you are unable to do this, you may wind up paying more than you would have otherwise. This can wipe out the benefits you have gained. Credit card companies will usually notify you that your period of 0% interest or low interest is nearing its expiry, don’t count on this.
Always look over your credit card statement for any errors. If everything looks right, go ahead and pay off the whole balance if this is possible for you. Doing so will save you a lot in payments of interest. Do not pay the minimum payment unless you absolutely cannot afford to pay more. The minimum payment is usually around 3% of the total balance, meaning it will take a very long time to pay off the balance and end up costing you a lot more money in the long run.
If you are unsure of anything, or have any questions, don’t be shy about getting in touch with your credit card company to head off any problems.
Nick Makaryk is an Internet Publisher, Copywriter, and Founder of Best Credit Cards A Free consumer credit card comparison site helps consumers find the Best Credit Card while avoiding high interest rates, charges, and fees.
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