A credit card is a swipe card that contains funds lent by a financial institution, typically a bank, to a cardholder, which enables the person to buy goods and services from a physical or virtual store, under a certain agreement that obliges the borrower to pay the money back with interest in a given period. Credit cards can be categorized according to the following:
- Balance transfer cards are used for card-to-card balance transferring purposes which usually have low introductory interest rates and fees.
- Charge cards allow the users to purchase products or services without spending limit if and only if they have a clear monthly balance.
- Premium cards commonly have higher annual fees which offer special benefits such as special event access, concierge services, airport lounge access, etc.
- Reward cards have a cashback feature, travel points counter, and other benefits which are bestowed to customers based on their spending habits.
- Secured credit cards contain cash deposits, which acts as collateral, that is required by the bank.
- Standard cards are often used for purchasing, balance transferring, or cash advances. It usually has an annual fee.
These cards can be further typified based on their offered interest rates—variable, fixed, and promotional.
- The variable interest rate has a value that can be changed at any time depending on the benchmark which it is built like prime interest rate. So, it is advisable to frequently check the interest rate of this type to avoid overspending because sometimes companies change their value without prior notice.
- The fixed interest rate on cards has a stable interest which can only be changed if the issuer notifies the cardholder 45 days beforehand. The advantage of this type gives the users the freedom to use the card or not at its new rate without implications.
- A promotional interest rate is a timely interest-related offer granted to users to alleviate their expenses as they have new purchases. However, availing of this type can negatively impact your credit score because it imposes a high risk to the lenders. Hence, be wary and read thoroughly its terms and conditions before applying for it.
Another type is a low rate credit cards which offers lower purchase interest rates as low as 14% per annum. This offer lasts for a card’s lifetime.
Low-Rate Credit Cards: Pros and Cons
Purchasing low-rate credit cards could give you the following advantages and disadvantages:
|Offers convenience as your on-the-go wallet.||Increases the chance of overspending.|
|Fast and easy tracking of purchases and balances.||Do not grant rewards.|
|Ables you to do rush buying through a pay later feature.||Has no exclusive or membership perks.|
|It aids you in budgeting as it offers lower monthly interest repayments.||No complimentary travel insurance.|
|It ables you to do cash advances.||Some cards offer a temporary low-interest rate feature.|
|Aids you in building redeemable credit points.|
|Protects you from purchase issues.|