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?Credit Cards With Low APRs ??" Are They a Good Thing?

By: William Blake

Credit cards can be good or bad, it all depends on how they are used. Whether they are a good or a bad thing is totally dependent on the person who holds them.

It can be used for the sake of convenience, for online shopping and the dozen other uses for which it was designed. Or, it can become a means of increasing your debt to absurd levels and cause you to pay painful amounts of unnecessary interest every month.

Debt consolidation is often a option considered by people facing serious credit card debt. And usually there is a stream of offers by companies ready to help them consolidate their debt onto a single credit card.

But those offers, though they frequently tout 'lower interest rates' should be viewed with a skeptical eye. Those lower interest rates are usually only available to a select few with very good credit ratings. That doesn't apply to the typical person who is struggling to overcome a history of excessive debt and find a way out.

At times these cards are offered to struggling debtors and it could be a way out. But before accepting a credit card with the goal of consolidating debt there are some things to consider.

Very rarely will such credit card offers lower the actual amount of principle outstanding. As a result, you have exactly the same amount of debt on the day you acquire the new card. And, over the long term you will actually sometimes pay more.

The interest rate is one thing to consider. But the length of time you will be paying on the debt is also a factor. A $10,000 debt at 8% will accrue more interest over 5 years than a debt with the same balance at 10% for 2 years so the overall amount you pay back on the debt with lower interest will be a great deal higher.

The culprit is compounding interest. With 8% interest over 5 years compounding interest means in reality your net interest rate paid on the balance above the principle is 21.656%. It would be 10.748% with 10% interest over 10 years.

Remember the 8% vs 10% are the APR in each scenario the annual percentage rate, this is the rate for a one year period - not the total percentage of interest.

The benefit of the loan with a lower interest rate and longer term is that your payments are significantly lower, less than half. It may be that your circumstances make a lower payment easier to handle and that may be worth the extra money in the long run. It is easy to find on line calculators to help you amortize loans with different terms to see which is the right fit for your situation.

Italian Article Marketing Directory: http://www.articolando.com

Would you like to come up with some extra cash to help pay off your credit card bills starting today? Visit the Debt Reduction Academy website, where you can sign up to receive your free 5 day mini course "Operation Money-Find: How To Find Money To Start Paying Off Your Debt This Month". Go get your copy now at www.debtreductionacademy.com/minicourse.php




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