Tinaciouslee

The interest rate on your credit cards affects the amount of money you have to pay for carrying balances. The interest rates will influence your monthly finances charges. Each time you receive your billing statement, you will notice finance charges if you carry your balance from one month to the next. If you are one of the many cardholders who are tired of paying off high interest balances, then it is time to switch to low interest cards. Below are the top three reasons why you need to sign on for low interest cards:

Reduced Interest Charges

The main draw of this card are the lower finances charges. To give an example, say you have a low interest card with a rate of 11.9% and a balance of $500. You will pay $4.95 on finance charges. However, if you made another $500 on purchases, your balance will increase to $1,000 and you will pay $9.92 in finance charges. Naturally, you will pay more as the interest rate increases. If your interest rate is about 21.9%, you will pay $9.13 finance charge on a $500 balance and $18.25 on a $1,000 balance. As your interest rate increases, so are the finance charges that you will pay.

Reduced Time To Pay Off Balances

Low interest card, has reduced balance payoff duration. Say you can only afford to pat $50 on your balance no matter how much the interest rate costs. You will pay $1,000 at 11.9% in 23 months with $107.68 in total paid interest. However, if you lose the low interest rate and it increases to 21.9%, it will take you approximately 25 months to pay off your balance with roughly $227 accumulated interest. If you want to lessen your interest, you need to pay more than $50.

Reduced Required Minimum Payments

Using low interest credit cards can provide reduce the required minimum amount of payments, however, this will depend entirely on how your card issuer calculate the rates. Some card company charges their minimum payment as a percent of the outstanding balance in addition to several fees. If this is the case for you, your interest rate will not affect your minimum payment.

On the other hand, if the minimum payments are calculated as percent of the total balance in addition to the finance charges. If this is the method being used by your card issuer, then you will pay lower minimum payment. The higher the interest, the higher the minimum amount of payment will be.