Low Interest Credit Card?

by PRESTON
(Navy veteran)

Credit cards - yes we need them - yes I hate them!

I'm a veteran that scrapes by with my disabled vets check. I had to buy my last vehicle, a van, with a credit card. The van was 4 yrs old, paid $3500.00. I face a 23.95% interest rate each month.

Question?? To get this country moving and up and spending, what if the credit card companies offered a low interest credit card and dropped their rates to 10%? I think the greedy companies would never agree - the ceo's, presidents, vice presidents, and managers might not get their Christmas bonuses.

My advice--try try try to keep your credit down low enough to pay it off monthly, that way it won't hurt you.

God bless America and our troops who put their lives on the line for us every day.

---

Preston,

Thank you for writing, and thank you for your service. Your letter raises several good points for our readers.

As we've mentioned on other pages, credit cards have become such an ingrained part of our culture that many Americans find themselves in need of some sort of credit card debt relief.

Credit cards can be a very useful tool. But you must learn to use them wisely, and not let them take control of your life. As Preston suggests, use them as a helpful tool to manage your expenditures, but be sure you can pay off the balance at the end of the month so you don't become in debt over your head.

If you must use credit cards, then take the time to go online and find the best credit card deals. Compare credit cards online. Search for the best credit card rates. Look for a 0 interest credit card, or a no annual fee credit card. Use a balance transfer credit card that's also a 0 apr credit card or look for low interest rate credit cards.

One of your best bets, Preston, would be to search online and find low interest rate credit cards. You can research various offers at BankRate.com, where you can search based on the category of card you're looking for, such as low interest credit card, balance transfer credit card, cash back credit cards, etc. BankRate is a leading aggregator of financial rate information, and is not affiliated with any financial institution, so you should get unbiased information from them.

In the upper right part of the page, they show current credit card averages. For example, today, the average low interest credit card is at 10.14% (that's pretty close to what you asked for), and the average balance transfer credit card is at 15.77%. That doesn't necessarily mean that you can't transfer balances to the low interest credit card, so read the terms carefully to know if you can transfer balances, and what the fee would be. A typical balance transfer fee is 3% of the transferred amount, with some maximum limit (maybe $75 or so). So if you transferred the entire $3500 balance, the transfer fee would be $105, or their maximum, whichever is lower. If their maximum fee is $75, that's all it would be, and it can be added to the balance (which means you don't have to pay it all in the first month, but if you don't, you'll be paying interest on it for the life of the loan).

But I think your best bet, Preston, would be to apply for USAA membership, if you're not already a member. During your Viet Nam service, USAA membership was open only to officers. It was later expanded to include enlisted members, but there were time limits on when you could join. It has just recently expanded again to allow anyone who has honorably served (honorable discharge) at any time to join.

USAA has some of the best terms you'll find, and their service is outstanding. As their motto says, they know what it means to serve. Click on the link above for their web site, where you can apply for membership.

According to their site, USAA's credit card interest rates are currently between 8.9% and 18.9%, depending on a number of factors, including your credit rating. But even their worst rate is 5 points better than what you have now. There also is no annual fee for their card, and their limit on balance transfer fees is $75.

BankRate.com also has a list of calculators in the lower left part of the page. If you use their balance transfer calculator, you can find out how your payment would change if you transfer your balance to a low interest rate credit card.

Putting in the information you gave me, if you qualified for USAA's 18.9% interest rate, it would drop your monthly payment by about $17. If you qualified for their best rate, 8.9%, that would drop your payment by $47 a month! Imagine how much that would save you over the life of the loan.

But here's an even better idea: Once you join USAA, apply to refinance your vehicle with USAA. Again, depending on your credit rating, USAA's auto loans can be as low as 3.99%! If you qualified for that rate, with a 36 month loan, your monthly payment would be about $103, but you'd have the van paid off in 3 years. If you make the same payment amount ($103) on a credit card charge of $3500 at an interest rate of 24.95%, it will take you 60 months (or 5 years) to pay it off.

In other words, for the same payment amount, you could save yourself two years and $2,472 in payments! Chances are good that the van may not last another 5 years, but you'd still be paying that credit card debt long after the van gives up the ghost.

Our best recommendation is to join USAA today! Then talk to one of their helpful representatives to figure out the best deal you qualify for.

Once you get the vehicle refinanced (which pays off the credit card), go to BankRate.com and shop for the best credit card deals you can find. Once you apply and get a card with better rates, cancel the old one with that outrageous interest rate.

But be aware that each time you apply for credit, it lowers your credit rating a little bit. So apply all at once (or within a few days) rather than applying for one this week, and another one after you hear from the first one, etc. That makes less of an impact on your credit score.

Also, get a free copy of your credit report, and make sure all the information on it is accurate.

We hope this information will help you take charge of your debt!

Janet