There are many benefits to owning a credit card in general. However, the benefits of owning a low interest credit card are nearly double. That is why it is extremely important that you locate one that has the lowest possible interest rate when you search for a credit card in Canada.
To completely understand why low interest credit cards are beneficial, you have to understand how your interest rate influences your credit card. To put it simply, your interest rate is the biggest factor in deterring monthly finance charges. The lower your interest rate, the lower your monthly charges will be.
The correct way to use a credit card is to pay off your full balance at the end of every month. This is the only way that you do not incur extra finance charges. If you do not pay off your full balance, you are charged interest on the remaining balance from the previous month. The lower the interest rate on your credit card, the lower the interest you incur.
It is important to remember that you get nothing for paying just your finance charges every month. By only paying the finance charges, you are only paying for the convenience of being able to buy goods with your credit card. You are not actually putting any money toward the goods that you purchase.
With a low interest credit card, you are able to pay off your credit card balance faster. This is because more of the money that you put toward your monthly payment is actually paying off the amount of money that you charged, and less is being used for the finance charges that you incurred during the previous month. This makes it easier for Canadian consumers to purchase goods that they are normally unable to afford right out of pocket.
All credit cards calculate your monthly payment differently. Regardless of how your credit card calculates your monthly payment, you can bet that it takes your interest rate into account. The higher your interest rate is, the higher your monthly payment is going to be. Once again, this all reflects back to the finance charges that are added to your balance as a result of using your credit card. It stands to reason that if you incur less finance charges, your monthly payment is going to be better.
If low interest cards help you save money by avoiding extra finance charges, why are some of the higher interest rate credit cards so popular? The truth is that most low interest credit cards do not come with as many extras as traditional credit cards. Low interest credit cards are cheaper if interest is added onto the original payment because it was not paid off in full by the end of the month. However, they usually come with fewer perks, such as cash back on purchases and free goods. These are perks that some consumers prefer over a lower interest rate.
Choosing between a low interest credit card and other popular ones all comes down to personal preference. If you plan to pay off your credit card balance before the end of every month, you will never be hit with finance charges. As a result, you may want a credit card with more perks. However, if you would rather rest easier knowing that any unpaid balance at the end of the month is not going to break the bank, a low interest credit card is better suited for you.