No one ever wants to pay high interest on his or her credit cards. When we are comparison shopping for a new card it’s one of the factors that everyone should take into consideration. Even though you should never carry a credit card balance from month-to-month, sometimes it’s unavoidable. Because of that it’s important to have the lowest rate possible for the card type you are applying for.
Unfortunately, sometimes the extremely low-interest credit cards don’t offer you much more than a way to pay for your goods. Here are five disadvantages to using a low-interest credit card.
- No rewards
Credit cards that do not give you the opportunity to earn rewards for your purchases almost always have a low interest rate. If you rarely carry a balance then you should be more interested in the rewards that you could earn as opposed to the lower interest rate.
- No signup bonus
Reward credit cards are amazing because each of the issuers are trying to attract new customers and that means high signup bonuses that can be worth hundreds if not thousands of dollars. The problem is that theses signup bonuses are never available on low-interest credit cards. One of the biggest reasons why an issuer can offer a huge signup is because they are charging a higher interest rate to their cardholders.
- Lack of benefits
Travel reward credit cards are not only great because they offer miles and points for your purchases, but they also offer a lot of other benefits as well. Most airlines credit cards will offer free checked baggage on flights when you use that particular card. Other cards might offer free airport lounge access. There are even some credit cards that will give you a statement credit for TSA Pre-check and incidental airline fees. All of these benefits come at a price and that is not only the annual fee, but also higher interest rates.
- You might not qualify for lowest rate
Most credit cards will publicize the lowest rate that they offer on a card. That rate is generally only available to those individuals with excellent credit. For everyone else there is a range of interest rates that you will fall into. So just remember that if you have less than ideal credit, your interest rate will be higher than what they have stated on the promotional material.
- You could be tempted to carry a balance
When someone has a high interest rate there is a lot of incentive to pay off that balance each month. The last thing you want to do is pay high finance charges. You are then just throwing money away. However when you have a low interest credit card you might be more tempted to carry a balance and overspend. While your finance charge might not be as much, it’s still wasted money.
*Editorial Note: Any opinions, analysis, reviews, or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved or otherwise endorsed by any card issuer.