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Low Interest Rate Cards - Quest for Credit: Finding Low Interest Rate Cards - What Determines Interest Rates?, Questions to Get Answered Before You Sign

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There are many factors to consider when shopping for a good low interest rate card. This guide will show you the tools to make informed decisions about your credit so that you don’t wind up getting stuck with a card that you’ll regret!

What Determines Interest Rates?

When determining your interest rate, credit card companies will primarily look at your credit. (Big surprise there). The better credit you have, the better rate you get. So if you don’t have credit, you can get a department store credit card or other type of specialized credit card in order to build it up. Either that, or you will need to settle for a higher rate on a major credit card, make sure to pay your bills on time, and then try to negotiate for a better rate after about six months.

Shop around for different interest rates, but don’t actually have multiple people pull your credit in a short amount of time – every request for credit gets recorded on your credit report, so doing this will make it look like you’re desperate for credit. (And just like being desperate for a date, anyone can tell you that this is not an attractive quality).

The conditions of the card itself can change the interest rate, too. This is why it’s important that you know all the details before signing up – just knowing it has a low interest rate isn’t enough to guarantee that getting the card a wise decision.

Questions to Get Answered Before You Sign

Is there an annual fee?
Some high-end or rewards cards come with an annual fee that you pay for the privilege of owning them. Make sure you weigh the “rewards” carefully against the cost. And be sure to consider all of the other factors listed below.

Does the low APR (interest rate) have a time limit?
Some card companies offer “teaser” rates to get you in the door, which then get jacked up after a period of months. Make sure you know exactly when the new rate starts, and exactly how much your new interest rate will be after that.

Is this a fixed-rate or variable APR card?
The majority of cards are variable rate. They use some form of index rating to decide their rates. Some will update rates quarterly, some monthly. While this does technically mean that your rate could go down as well as up, rest assured that as a general rule it is typically much more reluctant to go downwards!

Fixed-rate cards are more stable, but they can actually change over time, too. The difference is that they are required to notify you 15 days in advance before the new rate takes effect. But there is no regular planned interest rate change like there are with variable cards.

What are the penalties for late payment?
This is a particularly vital issue to determining what your interest rate will be. (Or could become). Some companies will radically spike your card’s interest rate the second that you become late on a payment, and every company takes its share of late fees and penalties for each offense. This is where things get really expensive for unwary credit users. Make sure you know all the penalties that the company enforces for defaults on payments.

Where to Start Looking

Creditcards.com has a nice tool for quickly comparing all the important stats of different card offers. They even offer a special search for low-interest credit cards, but just keep in mind these usually require high credit scores or they come with some unfavorable options like high annual fees.

Whoever you end up going with in the end, make sure you fully know what you’re getting yourself into! If you follow this guide, you will be a lot more prepared for the road ahead.

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