Pay Attention to Credit Card Interest Rates
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Is there anyone in the world who only has one credit card? I'm sure there are, but there aren't many of them. Most people have at least two. They have them most likely because they were tempted by special offers designed to attract people to sign up. Free gifts, no interest for the first few months or travel points are enough for people to keep signing up for more cards.
The next question is how many people carry balances on more than one card? Lots of people do that, too. As long as you are careful and responsible in what you are doing, there is nothing wrong with carrying a balance on your cards, but there are some tips that you need to keep in mind to make sure that carrying a balance doesn't cost you more than it has to.
First of all, be aware of the interest rates on your cards. Too many people make the same payment on all of their cards every month, out of habit. This doesn't necessarily make sense. If one card has a lower interest rate than the others, then you shouldn't pay it off as quickly. Make just the minimum payment on that account and pay more on the higher interest rate card. That way you will be able to pay off the higher rate card faster, while paying a lower interest rate on the rest of your outstanding balance. This can save you a significant amount of money.
There are other ways to take advantage of a card you have with a lower interest rate. Many cards will let you transfer a balance from another card to their card. It may make sense for you to transfer a balance from a high interest card to a lower interest card. Even if they don't allow this specifically, many cards will allow you to take out cash advances at the same interest rate as you pay for purchases. By using a cash advance from a low interest card to pay off a high interest card you will be saving a good deal in interest charges. You just have to be responsible enough not to charge up a new balance on the higher interest rate card.
While you are managing your balances to take advantage of interest rates it is still very important that you are making at least the minimum payment on every account. Missing a minimum payment will have a very detrimental effect on your credit rate and the interest rates you will be able to get in the future.
Posted by jonathan on October 26, 2005 at 07:41 PM