Your Guide to Choosing Between Low Interest Rate and Rewards Cards
Today there are many different credit cards available to choose from, so many, in fact, that all the choices can start to make your head spin. No matter which specific cards you are considering, however, one of your most basic decisions is likely going to be between a low interest rate or a rewards card. By understanding the important advantages and disadvantages of each type of card, as well as the differences between the two, you’ll be able to pick the card that best suits your lifestyle.
Low Interest Rate Credit Cards
Low interest rate cards offer lower finance charges on outstanding balances than other credit cards, and they also tend to come with lower minimum payments. Low rate cards, however, do not all work the same way. Some may start with a low introductory interest rate which increases after a certain amount of time, while others remain on a fixed rate. The catch with the fixed rate cards, however, is that after just a single missed payment your interest rate and your minimum payment might both increase substantially.
When You Should Consider a Low Interest Rate Credit Card
There are two main reasons why you may want to consider a low interest rate card. The first is if you often have trouble paying off your balance every month and if you can’t make high minimum payments. Low rate cards are also a good choice if you need to make a very expensive, one-time purchase and will need a while to pay it off. It will allow you to make small, regular payments with little accumulated interest over a period of time.
Rewards Credit Cards
Rewards cards work pretty much exactly as the name would suggest; they offer rewards and incentives for making your purchases with that card. The many different types of available incentives allow you to pick the card that offers rewards which you are actually likely to use. Some typical rewards include cash back, gas cards, retail rewards, gift cards, plane tickets, airline miles, and hotel stays. The tradeoff is that rewards cards usually come with higher fees and higher interest rates.
When You Should Consider a Rewards Credit Card
Rewards cards are the better choice for people who are capable of paying off their balance every month, even if they have to make large, unexpected purchases. For this reason, rewards cards are usually only available to those with fairly good credit scores.
If you are considering getting a rewards card, then it is important that you understand the logistics and finer points of your rewards program, as it may come with certain caps and restrictions that could limit your ability to take advantage of your incentives.
Making an Informed Decision
Taking careful stock of your spending habits and your ability to pay off your balance each month is crucial for picking the right credit card. If you take the time to consider the information presented above before signing up for one, then you’ll be able to take full advantage of the benefits and minimize any of the drawbacks of your chosen card.