A credit card with low or even no interest sounds like a good deal. Who wouldn't want to borrow money and pay it back whenever they want without having to pay a "penalty"? But bee poop is often added to things that sound like honey.
It is possible to get a credit card with a relatively low interest rate if you have good credit. There are still rates as low as 5%, but they probably won't be that low for long. (Most credit card debt is between 9% and 15%, which is still good.)
People with less than perfect credit are more likely to find hidden clauses in low-interest offers.
Look for limits on how much can be charged or moved. Some deals only give the low rate on amounts that are transferred. In other contracts, the length of time is limited. (6–12 months is typical, but 15 months is also a possibility.) After that time, the low interest rate changes to the normal APR for any balance that is still owed.
What does APR mean? What does "excellent" credit mean?
Annual Percentage Rate is what APR stands for. Say you charge $100 and the annual percentage rate is 12%. Does that mean that the interest you pay for the year is $12? Most likely not. The APR is broken up into a monthly rate of 1%, which is added to any outstanding balance EVERY month.
Your FICO score is a big part of how good your credit is. (FICO is a number that is figured out by a secret algorithm that looks at the total amount of debt, the number of late payments and how long they have been late, and other things.) This number and an analysis of your credit report, which includes your age, length of credit history, types of debt, etc., help card issuers decide if they should give you credit.
For people who have "good credit," there are other things to think about.
When your bill comes, do you pay off the whole amount? If that's the case, the APR doesn't matter because most companies don't charge any interest at all. (Note that they don't have to. Technically, interest starts to be charged when the purchase is made, not when the statement is made.)
Do you use the card to buy things for a lot of money or build up a lot of debt in one month? If not, the difference between a low interest rate and the normal APR is usually not very big.
Most cards with low interest rates have limitations in the "fine print." There are things like time limits after which the APR goes up, limits on how much you can borrow, etc. One type of low-interest card is called a "balance transfer." The rate on these cards is often limited to the amount transferred. The normal rate is used to figure out the interest on any new charges.
Also, remember that there are more than one APR for each card. Normal purchases have one rate, cash advances have another, and so on. Take your time reading the contract.
A word of warning to those who are tempted to take the low or no-interest offer with the plan to switch to another when the offer runs out. If you switch cards a lot, it can hurt your FICO score.
When you apply for something, a credit report is made and looked at. Your FICO is affected in part by how many of these checks were done. Your score is also affected by how long you've had a certain card. A red flag is when you get a lot of cards in a short amount of time.
A low-interest credit card is a reward for responsible behaviour for people with good credit (680 or higher, along with other things). Most don't cost anything every year. And if you carry a large balance from month to month, these cards can save you a lot of money.
