The Pros and Cons of Low Interest Credit Cards

Posted on February 10, 2012 by Max

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The last time credit card issuers sent out millions of envelopes advertising low interest credit cards, it was little more than an invitation into further debt and hidden fees.

But thanks to the CARD Act of 2009, low-interest credit cards today have a few perks that can make them a valuable asset for responsible consumers.

If you’re thinking about applying for a low- to no interest credit card in the near future, here’s a list of pros and cons to help you make up your mind.

The Pros of Low Interest Credit Cards

They’re Rewarding. These new low-interest credit cards give you more than just a 0% APR for a limited time. In addition to low-interest promotional periods, these cards now offer a rewards system comparable to popular cash back credit cards like the American Express Blue Cash Everyday. On top of that, cards like the Capital One Platinum Prestige also offer perks like 24-hour roadside assistance to consumers with good credit.

Longer Promotional Periods. Unlike the last generation of low-interest credit cards (which had promotional periods that ended after four to six months), newer cards like the Capitol One VentureOne and the Discover More offer 0% APR periods for as long as 21 months. On top of that, the CARD act requires creditors to allow customers at least 20 additional days to pay off their balance after the billing period ends. Companies are prohibited from penalizing customers by dropping the promotional APR until after this grace period expires. If you’re the type of person that likes to carry a balance on their card, then this is definitely good news.

The Cons of Low Interest Credit Cards

The Post-Promotional Interest is Higher than Ever. The biggest downside to these 0% APR credit cards is that the interest doesn’t stay low forever. As a matter of fact, once the promotional period ends, your APR could skyrocket to as high as 20%. If you’ve got a balance on your card when that switch happens, you should prepare yourself for some seriously steep interest fees.

They’re Still Playing the Balance Transfer Game. Although low-interest credit cards have been revamped and beefed-up, they’re still trying to woo debt-burdened consumers into transferring their balances. As we’ve discussed before, these balance transfers will typically just result in even more debt – especially if you’re foolish enough to actually use your shiny new card to pay for things.

When it comes to low-interest credit cards, the instrument might be different but the song is still the same. Low-interest cards are designed to attract consumers who have a balance they want to shelter from interest payments. They’re promised a lengthy 0% APR period and a comprehensive rewards system in exchange for transferring that balance over to the new card.  When the promotional period ends, the creditor is able to charge high interest on the remaining balance.

While such a balance transfer remains a poor idea for people with a history of revolving debt, financially responsible consumers will want to give these cards a closer look. The comprehensive bonuses, high limits and that lovely 21 month no-interest cushion can really pay off – as long as you can pay off your balance.

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