Why is a Low Interest Credit Card Like a Chameleon?
Contributed by Alix Mcmurray
Why is a Low Interest Credit Card Like a Chameleon?
If you have had credit difficulties or need a fresh start, a low interest credit card may be just what you're looking for. The promise that "no one is turned down" can be sweet music to the credit-hungry consumer. But is it really a "credit" card?
A Low APR is a Thing of Beauty in a Low Interest Credit Card
We all know beauty fades, and so, too, can a low APR (annual percentage rate) on your credit card. Often a low APR is time-limited, part of a promotional period that expires six months to one year after the card account is opened. Credit card companies are usually quite forthcoming about the time-limited nature of this interest rate. And it can be advantageous to a new card holder who expects to make significant large purchases at first, and then be able to pay them off before the promotional period expires.
If It Walks and Talks Like a Low Interest Credit Card....
A low interest credit card may not be a credit card at all, but instead, what's called a secure deposit card. It can be used at ATM stations and businesses which accept signature-based or PIN-based debit cards. Funds are made available through deposit by the card holder or the card holder's employer, by direct deposit. And there is no risk of overdraft, as debits can only be drawn against existing funds.
Furthermore, funds loaded onto the card will not be counted in the card balance until the customer's check or balance transfer clears the bank of origin. These features protect the financial institution as well as the consumer, as no transaction can be processed without proof of available funds to cover it. With no risk of overdraft, there is no need for interest payments or late fees.
