Should I get the Lowest Interest Credit Card?

It might seem really obvious that the lowest interest credit card will be the best. However, credit cards are used differently by different people and so the type of card you get will very much depend on what type of spender you are. So, consider each of the types and think about which will be the best for you.

Zero interest card
A zero interest credit card will not charge you any interest. They are quite rare but can still be found if you look hard enough. I might seem like these would be the very best types to get as you pay no interest as all but there are some things to watch out for. If you want to do a transfer form your existing credit card to the zero-interest card then there may be fees for this. It may even be that the zero interest is only on new purchases and not on transferred balances so check for this.

You also need to be aware that the zero interest will only be for certain time period. This tends to be for a few months up to a year. Once this time has finished you will move onto a variable interest rate which can be very high. It can therefore be wise to use these cards in a specific way. Use the cards to buy everything that you need during the free interest period making sure you set up a direct debit to repay any money that they insist on (there is likely to be a minimum payment that you have to pay) While you are spending, make sure that you put money into a savings account to cover what you are spending on the card. Then when the zero-interest period is up you can repay the card with the money in your savings account. You will gain the interest on the money in the savings account and not pay any interest on the card. If you think that there is any risk that you will not be able to make the repayment at the end of the zero-interest period then it will be wise to not have this sort of card.

Low interest card
There are some cards which offer lower interest compared with others. These tend to be on a variable rate so do keep checking and make sure that you are not paying more than you have to. These cards are probably best suited to people who do not repay their credit card in full each month. Although it is best to do this, there are those people that know they will not and therefore they will be charged interest on the card. This will be cheaper if they use a card with a low interest rate.

Just because you have a card with a low interest rate though, does not mean that you should keep spending on it without any thought. You will still be paying interest on the amount that you are borrowing so try to keep that to a minimum if you can. Remember that you do not have to only repay the minimum or the whole balance, you can pay a bit more than the minimum off each month or pop in lump sum payments when you can afford to in order to lower the debt.

Rewards card
Rewards cards tend to have higher interest which means that they are not good for anyone that is not going to repay their whole balance each month. This is because they will end up paying more than they get in return for the reward. It is much better to therefore just go for a card with lower interest. If you always pay off the full balance of the credit card then this can suit you, although it is wise to make sure that you set up a direct debit in order to repay it automatically so there is no risk that you will forget. You also need to make sure that you choose the right rewards card as you will need to choose a reward that will be useful to you. You might be rewarded with cash, vouchers or credits and so you need to see what different cards have on offer and what you would like to have. You will find that the rewards are very small. You will get a higher reward if you use the card more and you need to be wary of that. Try to only use the card as much as you normally would and make sure that you can afford to repay what you spend. It can be tempting to spend more because you are getting more of a reward but this is not wise. You will need to pay out a lot more just to get a very small amount back. See the reward as a bonus not a salary and you should be able to just spend what you normally would and gain from it.

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