Barry Choi: Switching to a low-interest credit card can help you pay off debt faster

For those who don’t have access to a line of credit, a low-interest card can be almost as beneficial.

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Let’s face it, credit cards charge extremely high interest rates. Most cards charge 20-24%, so if you have a balance, it may take some time to pay off your debt. What you might not realize is that there are a few quick ways to lower your interest rate.

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The best solution would be to check with your financial institution if you are eligible for a line of credit. If approved, you would take the funds and pay off all your credit card balances.

You would then only have to pay off your line of credit, which usually has an interest rate a few percentage points above the bank’s prime rate. At today’s rates, that’s about 4-7%, which is significantly lower than most credit cards.

There’s just one problem: there’s always a chance you won’t be approved for a line of credit. However, that doesn’t mean you’re out of luck. You might just want to consider getting a low-interest credit card instead.

How low interest credit cards work

As the name suggests, low interest credit cards come with a low interest rate. These days, you can expect the interest rate to range from 8.99% to 12.99%. That’s less than half the interest rate charged by some regular credit cards.

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What makes low interest credit cards attractive is that some of them come with a balance transfer option that gives you an even lower interest rate. For example, you could pay no interest for 12 months if you transfer an existing balance to your new low-interest credit card.

If you were to focus on paying off debt after completing a balance transfer, you might be able to significantly reduce the overall amount of interest you pay. And as soon as the promotional period ends, you will pay the regular low interest rate, so it is a win-win situation for you.

Most financial institutions offer a low interest credit card, but not all offer a balance transfer option. Even those that do may have different terms and conditions. That’s why you should know which low interest cards are available and what they offer before signing up.

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MBNA True Line Mastercard

Anyone looking to reduce their debt should consider the MBNA True Line Mastercard. It has a promotional zero percent annual interest rate for 12 months on balance transfers made within 90 days of opening an account. After the promotional period ends, you will pay 12.99% interest.

There is a catch. Balance transfers come with a fee of three percent of the amount you transfer. There is also a minimum charge of $7.50. So let’s say you plan to transfer $2,000, your fee would be $60. Although some people don’t like the idea of ​​paying a fee to transfer their balance, the amount of interest you’ll save in the long run is worth it. Additionally, this card has no annual fee, which adds to its appeal.

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Scotiabank Value Visa Card

The Scotiabank Visa Value Card has an annual fee of $29, but there is no fee if you perform a balance transfer. The promotional interest rate for balance transfers is 0.99% for 6 months. After that, the standard interest rate is 12.99%.

BMO Preferred Rate Mastercard

The BMO Preferred Rate Mastercard offers a promotional balance transfer rate of 3.99% for 9 months. The interest rate is 12.99% after the promotional period ends. Obviously, it’s not as good as what MBNA offers, but the BMO card may still be worth it, depending on your situation.

Credit card providers generally do not allow you to make a balance transfer from the same financial institution. For example, since MBNA is owned by TD Bank, you will not be able to transfer the balance to another MBNA or TD credit card if you already have one of their cards. Applying for the BMO Preferred Rate Mastercard would be a good alternative.

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HSBC Mastercard + Rewards

The HSBC+ Rewards Mastercard is a unique low interest credit card. There is no balance transfer promotion, but the regular interest rate is 11.90%. What makes this card attractive is that you will earn HSBC Rewards Plus points on all your purchases. This means that you will be able to earn rewards while paying off your debt.

The card comes with a $25 annual fee, but HSBC often runs promotions where the fee is waived in the first year. You also get additional benefits such as price protection, extended warranty and purchase assurance.

American Express Essential credit card

The American Express Essential credit card has a 12.99% interest rate and no annual fee, but no balance transfer option. That said, many people are attracted to American Express cards because they give you access to American Express Experiences.

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These benefits include pre-sale tickets to concerts and theater productions as well as access to exclusive dining and entertainment experiences. American Express even offers curated private shopping experiences for its cardholders.

Take advantage of these low interest rates

Remember that low interest credit cards are still regular credit cards. If you accumulate purchases and don’t actively pay down your debt, you could end up owing more, even with a low-interest card. The promotional interest rates offered with balance transfers are some of the lowest interest rates you’ll likely ever pay. Try to focus on paying off your debt during the promotional period as you could save a significant amount.

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.

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