Credit cards also known as ‘plastic money’ has emerged as the most popular mode of payment. In early times, people had to carry money while going for shopping. But now people prefer to carry credit cards with them as it enables them to shop freely without thinking about the shortage of cash. The bank which issues a credit card issues a certain amount with which a card holder can purchase goods but have to repay each month with an interest. Before understanding low APR credit cards we first have to understand the meaning of APR.
Annual Percentage Rate (APR) is the rate of interest that issuing bank charges from its cardholders for using the services and taking advantages of its features.APR determines the extra amount levied on the cardholder in case he fail to pay the amount in due time.APR rates vary from bank to bank and bank can give a credit card with lower or higher APR .After understanding the meaning of APR, the next thing to discuss is the benefit of low APR credit cards.
APR are of two types-fixed APR and variable APR. Fixed APR credit cards are beneficial for those customers who are not aware of regular fluctuations in interest where as variable APR are considered best for individuals who have strong and stable financial capacity.
Some banks offer low APR introductory rate on their credit cards. After the introductory period expires, their APR goes up. Some banks even offer zero APR rates for its introductory phase. This type of low APR rates has become very popular nowadays. Some banks charge late fees from its cardholders who failed to deposit money within due time on the amount already levied with rate of interest.
APR has become a medium for the banks to earn revenue. They earn it by giving loan to customers via credit cards. Most of the times bank charge high APR’S on credit cards. But sometimes, as a part of marketing and to attract more customers, banks reduce their APR rates for certain mechanism like Balance transfers. It is a very rare case that consumers have zero balance on their credit cards. Credit card holders with heavy outstanding balance find very difficult to repay and find it very burdensome to repay even in installments. With no other option they prefer to transfer their outstanding amount to another credit card with zero or lower APR .Some banks offer lower or zero APR at introductory phase. Consumers can greatly be benefitted as they can repay a major chunk of their outstanding amount in this introductory phase.
Moreover low APR credit cards offer an opportunity to the cardholders to save money as it means lower interest per year or lower interest paid to bank in case of nonpayment in due time by the cardholder. It also provides an option of variable or fixed APR so consumers have more freedom and flexibility. Businessman and financially sound individuals prefer variable APR based on the monthly rates in business.
At last, I would like to include that credit card is a tool for one’s convenience in financial matters and it will be beneficial for a cardholder to use low APR credit cards.