Low Interest Credit Cards, Good or Evil?

Credit cards being good or bad is a misnomer; they are merely financial tools. Whether you use these tools to benefit you or destroy your financial security is up to you. Credit cards can be used for purposes of convenience such as for online shopping as well as dozens of other things they were designed for. It can also be a means to ruin yourself financially by increasing your levels of debt that you carry to dangerous ones.

Many people abusing credit cards and finding themselves in financial trouble see the torrent of debt consolidation offers they receive in the mail as their savior. These consolidation offers often boast of low interest rates but these rates usually only apply to the select few with good credit ratings. There are hidden dangers to people that have less than satisfactory credit ratings.

If you can qualify for one of these cards they can help solve the problem over a long period of time. However, even if you are accepted for a low interest card they rarely can lower the amount that you will pay back. Also, borrowing to pay debt can turn into a vicious cycle if not done properly.

To demonstrate this issue better let’s use an example. You borrow $10,000 and have two options, pay 8% APR over 5 years or 10% APR over 2 years. If you choose the first option you actually pay out a substantial amount more than if you chose the second option. Some people would rather have the piece of mind that comes with the extended loan period and lower monthly payments but you must realize that you actually spend significantly more that way.

Before attempting to utilize a low interest card to help lower you debt use an online calculator to run various scenarios. Check to see if the lower interest rate will pay off or if the extended loan duration will actually end up costing you more over the long term.

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