Why don’t I bring up low interest rate credit cards? There are many reasons and full disclosure, this post may sound a little harsh, but it’s the truth.
First of all, Pointshogger is about maximizing rewards for Canadians. Unfortunately, low interest rate credit cards do not offer any sort of reward. The main reason they cannot offer any rewards is because they are not even making much money on the credit card anyway, because they do not charge the usual 18% – 20% interest rates.
So there is significant less profit on late payments. Make no mistake, credit card companies make a tonne of money on late payments, and that’s a big reason why they can charge such high interest.
Imagine no one had a late payment. Imagine how much less money the credit cards companies would make? That means they will have to get the profit from somewhere else. Probably offer less rewards for people who can actually pay their balance in full?
If you cannot afford to pay your balance in full…
… then you shouldn’t have a credit card to begin with. I know this sounds harsh, but it is the truth. You should never spend more than you can afford. That is why lots of financial experts recommend that you just use cash or debit. Then you know for sure that you have the money to pay for something.
Also, you are just hurting your credit score, for every month that you cannot pay your balance in full.
Though, once you start using overdraft or lines of credits, it could make sense to consider a low interest credit card.
When it does make sense
The only time it may make sense to have a low interest rate credit card is when you have absolutely no way of making more income in time to pay for a bill, and you already taken all the possible measures to reduce your expenses, so you need a temporary measure to help lower your interest rate. A credit card with low or zero interest (for a promotional period) can make sense, as a TEMPORARY measure. I would like to emphasize temporary again, because this cannot be a permanent solution.
Either you find a way to make more income, or you find a way to reduce your expenses. Otherwise, the interest rates will just catch up to you and that is why people need to declare bankruptcy.
That being said, if you absolutely need to have a credit card with low interest, the only one I would really consider is the MBNA Platinum Plus MasterCard.
I apologize if I offended any body. I do understand that there are situations where it can make sense, temporarily to have a low interest credit card, but it really cannot be a permanent solution. Get yourself out of the low interest credit card situation, so that you can start earning more cash back,, miles and/or points! It’s more fun!