Saving with a Lower APR:
Using a high interest credit card
is like throwing money down the drain! Although your credit
score ultimately determines your APR, shop wisely for
a credit card with a lower interest rate and you'll save
tons of money. Here's an example:
Let's say your old credit card
has an interest rate of 15.99%. But you're offered another
card at 10.99%. Over the course of a year, you could
save 5% on interest charges. How does this add up?
Assume you have a balance of
$5,000 on your credit card:
OLD CARD:
$5,000 x 15.99% = $ 799.50 per year
NEW CARD:
$5,000 x 10.99% = $ 549.50 per year
You could save $250 in interest
charges per year! If your balance was $10,000, you could
save twice as much! This extra money could be used to
pay down your existing credit card balances more quickly,
or used to make cash purchases and avoid increasing
your existing debt.
Saving with a 0% APR:
Another great money-saving option
is a 0% APR credit card. They
have become increasingly popular in recent years-- and
for good reason! They offer a multitude of ways to save
money and pay off your debt more quickly. Not only can
you avoid interest charges on new purchases, but you can
also transfer your existing credit card balances and pay
0% interest! Here's a simple example of how you can save:
Assume you have $5000 in existing
credit card debt, or you will make a $5000 purchase
with your new card:
REGULAR CARD:
$5,000 x 10.99% = $ 549.50 after 1st year
0% APR FOR 12 MONTHS:
$5,000 x 0.00% = $ 0.00 after 1st year
With a balance of $5000, you
could save $549.50 in interest the first year as compared
to your standard credit card with a 10.99% APR!
But what if the 0% intro APR is
only for 6 months? And what if the ongoing rate (after
the intro) is higher? Can you still save? Here's another
example:
Assume you have $5000 in existing
credit card debt. You can either choose a lower rate
credit card at 9.99%, or you can choose a 0% credit
card for 6 months with an ongoing rate of 12.99%:
LOW APR CARD:
$5,000 x 9.99% = $ 499.50 per year
0% APR CARD:
$5,000 x 0.00% = $ 0.00 (for 6 months)
$5,000 x 12.99% / 2 = $ 324.75 (for 6 months)
You still save $174.75 per year
with a 0% credit card! In this situation, even if the
0% APR is only for 6 months and the ongoing rate is
higher, you'll still save money!
Saving EVEN MORE with a 0% APR:
In these examples, you can clearly
see the savings a 0% APR provides. But if you transfer
your credit card balances before the intro period is over,
you can save much more! Essentially, you can carry your
credit card balances interest-free as long as you switch
your credit cards before the intro periods end. Many people
have taken advantage of this method to pay off debts and
save thousands of dollars in interest. But be aware, switching
credit cards too frequently can have a negative impact
on your credit score. So switch in moderation.
The best option is to take advantage
of a 0% APR credit card with the longest intro APR and
the lowest ongoing APR (after the intro). This way, you
can save the most money over time! Luckily, most low
APR credit cards on our site have a 0% APR as well.
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