If you are looking to start using a credit card, there are a number of things you need to know. Here is a list of the factors that make cards low interest credit cards Canada.
Whether you have used the low interest credit cards Canada for a while or you are just starting out and are doing your research, it is never too late to learn one or two things about these cards. This equips you with the knowledge of how best to use the cards in order to get the most out of them. Credit cards come in two different means of payment. The first is the one that a credit card user pays the balance all at once and the second one is where the user prefers to repay the balance over a prolonged period of time. Whichever means of payment you prefer, having a low-interest card aids you in lowering the cost of having a credit card.
How credit card repayment works
If you pay your credit card balance all at once, the interest rate is added to the amount allowed by the card and your debt is settled. However, for the prolonged payment, each time your balance is forwarded to the next month, the credit card issuer adds a finance charge calculated based on the interest rate of the card and the balance. Therefore, if your credit card carries a high interest, the charges will be higher and vice versa. This also means that the more you push repaying the balance, the more the amount of money you repay at the end of it all.
The key requirements for low interest credit cards Canada
- A good credit score – Just like any other low-interest rate loan, a low-interest credit card in Canada requires you to have a fairly good credit score. The credit score considered fairly good by most credit card issuers in Canada is between 700 and 900. With this credit score, you stand a chance of receiving a credit card with low interest.
- A consistent source of income – Applying for a credit card is similar to getting a loan. The issuers of these loans need to be sure that you will be able to repay the balance once you get the credit card. Proof of a consistent source of income is all they need to prove this. If your income is higher than most people, you stand a chance of getting a higher amount of limit on how much you can spend on the card.
- Low debt- You may have acquired debts from various lenders before looking to apply for the credit card. The credit card issuer needs to know the amount of money you owe other lenders in order to be able to evaluate your ability to repay the credit card balance. Keeping the level of your other debts low is important when getting a credit card. This not only makes your debt repayment manageable but also plays well for you when getting a low-interest rate credit card.
- Security – Most low-interest credit cards in Canada need you to deposit an amount of money for them to provide the card. In most case, your card limit is equal to the amount of money you deposit as security. The good thing about this is that the interest is as low as it can get therefore making your repayment process easy.
Factors that make a credit card low interest
- Annual percentage rate (APR) – Low-interest rate cards have the lowest APR. Some credit cards even offer 0% APR for the first year an individual is holding the card. Once the one-year period lapses, the APR can go as far as 22.24%. When selecting a card, always check for the one year 0% fee. This gives you enough time to repay the balance.
- Balance transfer fee- This is the amount charged to transfer debt from other lenders. A low-interest card offers a fee that ranges from 5% to 3% of the amount being transferred.
- Cash advance fee- Some credit cards allow you to withdraw a certain amount of money. The fee they charge for this is called cash advance fee. The fee goes as low as 3% and as high as 10%. Low-interest cards provide the lowest amounts of cash advance charges.
- Foreign transaction fee – This is the amount charged on any purchase made outside one’s country of origin. Most low-interest credit cards with this feature charge a 3% fee on any purchase. Some cards offer a fee of as low as 2.7%.
Above are a few of the key elements you need to know about low interest credit cards Canada before going for one.