The one thing that everyone hates about credit cards is paying high interest rates, which can be especially costly. There are credit cards offered with low interest rates that can appeal to cardholders who are frustrated by high interest charges each month. They may offer rates of 10% APR or even less, but it may come at a cost.
As with all credit products, it's important to determine your needs first, then shop for the card that will best meet them. Here are seven reasons that a low-interest card may not be your best choice.
1. No Rewards
Credit cards without rewards will always have a lower interest rate than similar products that offer points, miles or cash back. So while the lower-interest card will make perfect sense for those who regularly carry a balance, those who rarely incur interest charges might be better off receiving a return for their spending on a card with a higher interest rate.
2. Fewer Benefits
Credit cards with the lowest interest rates tend to have fewer benefits. For example, airline rewards cards with higher interest rates may offer not just frequent flier miles, but checked baggage fee waivers, priority service, and even an airport lounge business membership. Of course, there is no reason why you can't hold one of these cards for the benefits, but then make most of your charges to a low-interest credit card.
3. No Sign-Up Bonus
One of the great things about the highly competitive market for credit cards is that banks will frequently offer new applicants hundreds of dollars worth of points or miles just to give their products a try. Yet you typically won't find these generous offers when choosing a low-interest credit card. When cardholders are not paying a large amount in interest charges each year, the value of these offers can exceed any additional interest costs. But once again, there is nothing to prevent cardholders from earning the sign-up bonus, and then using a low-interest credit card when they need to carry a balance.
4. You Might Miss Out on Promotional Financing Offers
The only thing better than a credit card with a low interest rate is one with an interest rate of zero. Many credit cards offer new applicants interest-free promotional financing on both new purchases and balance transfers. While these offers may be for cards with a low interest rate, cards with the very lowest interest rates generally don't offer promotional financing.
5. Cardholders May Not Qualify for Lowest Rate
Many credit cards offer a range of interest rates, depending on the applicant's creditworthiness. So while the lowest rates in that range might be competitive, only applicants with excellent credit will qualify for those low rates. Everyone else will receive a less competitive rate. You can get your credit scores for free on Credit.com to see where you stand.