Avoid These Low Interest Credit Card Traps

After you have your car loan approved and you finally pick up your sparkling new

car from the showroom your focus may soon turn to getting rid of your debts as soon as possible. Every prudent borrower has a budget to live by and one of the critical points of a budget is to minimise expenses. And one of the best ways to minimise monthly expenses is to get rid of debt, especially credit cards.

It is no secret that credit cards are the bane of many consumers because using easy credit and soon result in unmanageable monthly repayments. Once you are in this spiral it can be difficult to keep your head above water and you may become susceptible to offers of further credit which make consolidating your debt look quite attractive.

One of the more innovative ways that lenders have attempted to seduce consumers is to offer low interest rate credit cards to consolidate existing credit card debts. On the surface, this might seem to be a strange statement. Surely a credit card at 2.99% is better than the credit card charging 17%? Well, the answer is yes and no. Yes, a lower interest rate is better for a consumer, but not if the conditions which attach to the card make it ultimately more expensive.

Let's look at how this can happen and what you can do to avoid the trap.

Whilst not every credit card lender is the same, many attach a string of conditions to these low-interest rate credit cards that have a sting in the tail far greater than most consumers imagine. Let's take a look at some of the traps so you can avoid them.

Once you have transferred the balance of your old credit card to your new low-interest rate card there will be a strict timeframe over which the low interest rate will apply. In some cases it might be 12 months, or in other cases as little as 6 months. At the end of this period the credit card will revert to its normal rate which may be higher than the original card! This is a condition which you should always check before signing up, if you cannot pay out the complete debt within the timeframe stipulated you may be better off making extra repayments with your existing card.

If you use your low rate interest card for further purchases it may negate the low rate on the transfer debt. For example, if you transferred $10,000 to a new low rate card at 2.99%, you will certainly benefit from the lower rate of interest, but if you use the card to purchase something else the low interest rate may cease to apply and the normal rate of interest will now apply to the entire debt! That's why is important to check the fine print before you make a change. Make sure that you only use the credit card for the transferred debt and never use it for any subsequent purchases.

These two simple points prove the fact that you need to be vigilant when applying for any car loan or credit card offer. Check the details before you make a final decision.

by: Todd Bertshinger

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