Low Interest Rate Credit Cards

Everyone wants a zero-interest credit card. It’s human nature. Unfortunately, not everyone qualifies for a zero-interest credit card. Most credit cards offer lower interest rates as an inducement for applying. Other cards offer lower interest rates to card holders who pay off balances each month. In most cases, the only way to get and keep low interest rates on credit cards is to have a big bank balance and/or a really high credit score.

When High Credit Scores and Large Balances in the Bank Can Provide Low Interest

Most banks which issue their own credit cards are willing to give good customers lower interest fees on their credit cards. Other than that, no other national credit card issuer is going to offer extremely low interest rates on their cards. Some credit cards are tied to an index of interest rates (which are at historic all-time lows right now) but they are providing an interest rate at 2-5% over prime rate. However, these rates are subject to a number of conditions which must be met by the card holder in order to continue receiving the lowest interest rate.

The Best Way to Have a Low Interest Credit Card is to Use Pre-paid or Debit Cards

Unless you have a lot of money in the bank that issues your credit card, the only other options available are to use cards that have no interest charges on them. That means using Pre-paid cards or Debit Cards. These aren’t actual credit cards. They are cards that allow access to previously deposited funds into an account. Since you are using your own money, there is no credit transaction which takes place. As no money is being granted on credit, no interest is charged.

Prepaid Cards versus Debit Cards

Consumers with poor credit often utilize prepaid credit cards. But prepaid credit cards aren’t like using Debit cards and come with a variety of conditions and costs which Debit cards don’t incur. Many people ask the question, “What’s the difference between having a prepaid card and cash?” The answer is, in certain circumstances a prepaid card can be a little more helpful than just handing over cash.

Prepaid Cards – analysis

Placing money into a prepaid card account can be done over the phone, on the internet, or by a third party. Most prepaid cards come with up-front costs as well as service fees. Since the credit limit on the card is set at whatever the balance in the account happens to be, there’s no over limit fees. As long as the cardholder is aware of the balance, they shouldn’t be embarrassed at the check-out line by having the card denied. Some prepaid card companies charge a transaction fee, per transaction; others charge it for a certain number of charge transactions.

Basic Benefits of a Prepaid Credit Card

Prepaid card providers have a variety of benefits offered to clients, including:

• Free Direct Deposit
• Pay rent, utilities and other bills online or over the phone
• Track spending with online budgeting tools and alerts to mobile phone
• No credit check or bank account required
• Some cards offer rewards programs for purchases
• Use everywhere Visa, MasterCard debit is accepted
• Prepaid credit card is not attached to a bank account; if lost or stolen the bank account is safe

Debit Cards – a Review

When a bank or credit union offers its customers a Debit card, what are they really offering? Basically, it’s instant access to the checking or savings account for a vendor or retailer. When the transaction is conducted, the money from the account is instantly deducted and deposited into the seller’s account. It’s as though the customer just handed over cash. Debit cards provide more than the instantaneous transaction; some cards offer Reward Points for users.

Basic Benefits of a Debit Card

• Use of a debit card is generally limited to the existing funds in the account, preventing the consumer from racking up debt or being charged interest, late fees, or other fees
• It doesn’t take great credit to have a debit card
• Some cards offer rewards programs for usage

Some Bad News About Debit Cards …

There are several potential problem areas for Debit card users, including:

• Overdrafts – A purchase may still be authorized, however, the bank will assess an overdraft fee which in some cases can run as high as $35. Consumers can receive multiple overdraft fees if they make several purchases when they have insufficient funds.
• Theft or Loss protections – A cardholder’s liability is normally only $50 if they notify their bank within two days of discovering fraudulent charges, however, after two days, the liability increases to $500 and can go up to the entire account balance after 60 days.
• Purchase disputes – Merchant disputes are harder to win because the bank isn’t on their side to help.
• Credit rating – Not all debit cards help build a credit score.
• Weird fees – Some banks are now charging over-limit fees or non-sufficient funds fees based upon pre-authorizations, and even attempted but refused transactions by the merchant (some of which may not even be known to the cardholder).
• Loss of funds – Since debit cards are typically linked to bank accounts, if a debit card and PIN number is stolen, the entire bank account could be drained of funds.

Which is better? Prepaid or Debit?

The best answer is “both”. Depending upon a cardholder’s situation, either card can be a significant help – particularly when the user is dealing with a “credit card” only type of transaction. These transactions occur with hotels, rental cars, airline tickets, and other types of purchases involving travel. Please note, in some cases, a debit or prepaid card will require additional money on account as these vendors tend to “reserve” funds from the account in case they need access for additional charges and expenses by the customer. In other words, a hotel might charge the card for a room, but it will also “reserve” more money than the room charge for meals, additional nights stay, parking fees, internet usage, and in-room movie charges. Consumers should understand the hotel’s “reserve” policies and amounts in advance of providing card information.