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Low Rate Credit Cards

Low Rate Credit Cards: Just a mirage in the desert
Most people love a good deal and for them, hunting for low rate credit cards can be an experience in itself. They will search the Internet and even ask friends and colleagues on the best offers. They’ll even search their mail every few days just to check if any offer has arrived. Are you one of them? Maybe you relaxed a bit – just because these cards have a low rate doesn’t mean they won’t fleece you

Why is it a mirage?
Ever been to any desert? If you’ve been in the sun too long and traveling the sandy dunes for a long time, chances are you’ll start seeing these images of water in the distance. However when you approach these, you’ll find there was no water in it after all! These illusions are called ‘mirages’. All false hope and no substance – to sum it up, low rate credit cards are all this and more. One thing to keep in mind is that all credit card companies are here to make money. Therefore, why would they offer you a low interest unless they had something going for them, right?

How do they recover the money?
Ever wondered how credit companies recover their money when they offer you these fancy, low rates? The answer is simple – by hiding the facts from you of course! Many companies have been known to swindle millions from their so-called ‘great offers’. One company I know offered customers the prospect of a very low balance transfer rate. They would ask customers to transfer all their balances to the new card, for a nominal upfront fee. Unsuspecting customers would pay up only to realize later that the balance transfer rate was much higher than even average! No customer in their right mind would ever transfer balances to a higher rate card, right? That’s why this company would hide the actual rate. The worst part was that the company packed their bags after swindling all their customers’ money. There was no trace of them later!

This was of course an extreme case. However, credit card companies always seem to be hiding the real facts while offering a ‘good deal’. Therefore, for every 0% balance transfer rate, there’s also an expiry date attached – usually 6 to 12 months. There’ll also be conditions that state if you default on the payment, the rates go back to default. If you pay less than minimum even in one month, the rates go back to default. The same goes for Annual Purchase Rate and so many other promotional schemes offered.

There was a time when credit card companies would charge a 0% balance transfer rate and no fee as well. Soon they realized customers were capitalizing on this scheme and they were suffering losses. Very soon, the balance transfer fee was hiked to 2 to even 3% of the transaction. Now there are just a handful of these credit card companies that continue to offer a zero balance transfer fee.

I guess the bottom-line is that the moment a credit card company realizes it’s about to incur losses, it will seek ways to more than recover the cost. They’re not here for charity – they’re in a business. Just like any business, they need to show profits.

What should you do about it?
Nothing! There’s not much you can do about it really, except being cautious yourself. Read the fine print carefully, clarify any doubts you have. The trouble starts when you start assuming and don’t ask. If you ask, the credit card company will have to answer your doubts and be honest. Make sure you understand all the terms and conditions stated in the product literature. If you don’t understand something, pick up the phone and ask the company. This will ensure you never get fooled by low rate credit cards.

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CREDIT CARD TYPES

Choosing the credit card that's best for your needs and situation starts with knowing what options are available to you. The following list details the most common credit cards available:

	Balance transfer credit cards - Balance transfers are a way of transferring outstanding balances from existing credit cards to another card that offers a lower interest rate. For example, if you your have a high annual percentage rate (APR) credit card with a significant outstanding balance, you can transfer the balance to another card with a lower rate or even one offer zero interest. Typically these cards offer low balance transfer rates for a specified period of time allowing you to save hundreds (or even thousands) of dollars in monthly interest charges.
	Low-interest credit cards - These cards offer a low introductory annual percentage rate (APR) for a promotional period, after which they can change to a higher rate or a fixed-rate. If you plan on making a large purchase, it's a good idea to pick up a low-interest credit card to take advantage of the savings on interest during the introductory period.
	Cash rebate credit cards - Cash rebate cards accumulate "points" for1 every purchase you make using the card. Most cash reward cards award a point based off 1% of the purchase total, excluding interest and finance charges. For example, if you make a purchase for $1,000 the credit card will award you with 10 points (or, $10.00). These cards are great for loyal customers who make payments on-time every month.
	Reward credit cards - Reward credit cards are similar to cash rebate credit cards, but differ in that they offer various forms of "rewards" for the purchases you make. For example, you can accumulate rewards for frequent-flyer-miles, free magazine subscriptions, and even hotel and travel discounts. Ideal for those who enjoy getting something for free from their credit cards.
	Travel credit cards - Travel credit cards are ideal for the frequent flyer who travels the globe on a frequent basis. These cards accumulate significant reward points every time you make a travel-related purchase. You can gain discounted airline tickets, rent cards for free, and even get discounted hotel rates!
	Pre-paid credit cards - Pre-paid credit cards are ideal for those who are on a tight budget and don't want to fall prey to the financial pitfalls associated with standard credit cards. They work similar to gift certificates or debit cards. You deposit money into the card and then use the card to make purchases as you would a typical credit card.
	Secured credit cards - Secured credit cards are ideal for people with poor or no credit. They work on a collateral system, where you put up something of value against the debt on the card.