Never Get a Credit Card with a low APR
I’m sure you’ve seen those commercials or had a banker try to sell you a low APR (Annual Percentage Rate) credit card because it’s supposed to be a great deal! Of course, you’ll pay less interest on the balance you’re carrying on your credit card, but if you’ve been reading my articles you’ll think otherwise.
What a Lower APR Credit Card Actually Means
I’m someone that pays my credit card balance in full every month. So I don’t care if the APR of my card is 10% or 30%. The market average is probably somewhere around 19-20% depending on where you live. I hope that you’re like me and if you aren’t you should do everything you can to pay your credit card balance in full.
A lower APR means you’ll pay less interest on the balance you carry on your credit card month after month. If you buy something today, and pay it off by the deadline that you get on your next credit card balance, you pay zero interest. But if you don’t pay that balance off, this is where the APR kicks in and because you’re paying interest on a monthly basis, your effective interest rate is actually higher than the APR that is advertised.
A lower APR credit card usually means you don’t get any other benefits because you’re getting the “special” low APR rate. You’ll find plenty of credit cards with no annual fee so that’s a bonus but you’ll also find plenty of cards that can accumulate points for no annual fee.
Points vs a Lower APR Credit Card
I’m all about points. You can accumulate points on pretty much everything you buy. Depending on your card, you could get bonus points for purchases on grocery and gas. These points really add up over time. I actually just converted points for a roundtrip airfare to Japan this year and I thought it was great.
A lower APR card won’t get you any points unless you can find a rare card that has that arrangement. You might save money on interest payments but that’s about it, and again I cannot stress how important it is to avoid carrying a credit card balance at all costs.
The Alternatives to a Lower APR Credit Card
Instead of searching for a lower APR credit card, which pretty much every bank will have, you should look to find other sources of loans and credit lines with much lower interest rates. In today’s economy and with interest rates being so low, you should be able to get a line of credit with your bank that will easily beat a lower APR credit cards rates. If your bank doesn’t give you a line of credit, don’t give up, search around and talk to a variety of financial institutions to see what is available.
Instead of carrying a balance on your credit card, regardless of the APR, you should either pay it off or transfer the balance onto a line of credit. The interest rate on my line of credit is 4.5% while the APR on my card is 19.9%. 15.4% is a huge difference and could mean a retirement savings of a difference in the long term, so it’s really important that you make sure you don’t carry a balance on your credit card! I hope I’ve gotten that message through!
Nighttime Osaka photo taken by Mo2.
