If you’re paying more than 15% interest on your current credit card or need to rebuild a bad credit score, there is a way out. After all, millions of Canadians break free from the credit card trap each year. Banks tend to use a lot of tricks to keep you paying back money with high-interest rates, but there’s no reason not to switch cards for a better deal, especially if you’re balance is larger than $1,000.
Are You Overpaying Credit Card Debts?
Interest rates can be as high as 19%, so if you’re only making minimum payments, you’re probably taking on a significant burden when it comes to your finances. Add to that, penalties and fees for late payment, and it gets even worse.
For example, if you’re paying $240 each month towards a balance of $6,000 with an interest rate of 15%, it will take you 129 months to pay off your debt! [1] You will also end up paying over $2,600 in interest alone! And that’s considering you never miss a payment and never incur any penalties. This debt can also snowball if you’re unable to pay due to unemployment or other obligations.
Take Control of Your Credit Card Debt
As you probably know by now, a credit card debt with a high-interest rate can get out of hand pretty quickly. Banks will offer you consolidation loans which can be very risky and fail to tackle the root cause or advise you to negotiate for a lower interest rate which often leads nowhere. The best way to fight credit card debt is to lower or remove interest rates while you pay off your credit card balance.
How to Reduce or Eliminate Credit Card Interest Rates
The simplest way to do so is to get a new credit card that offers a 0% interest rate and transfer your debt there. Credit utilization will go down with a new line of credit, and the less you’re using, the higher your score will be. Another advantage of this approach is that you will be able to pay your credit card off faster due to a lower interest rate. This in turn lowers credit utilization further. However, you must come up with a strict plan and time frame for when you want to pay off your debt. But, otherwise, a 0% credit card gives you a second chance to become debt-free in a relatively easy way.
Best Low-Interest and No-Fee Credit Cards
Below we’ve selected four of the best no-fee [2] and low-interest [3] credit cards, but others might suit your financial situation better, so it’s always best to do further research.
1. BMO Air Miles MasterCard- APR 19.99%
- No annual fee
- $15k minimum required income
- APR 8.99%
- No annual fee
- $15k minimum required income
- APR 16.99%
- No annual fee
- No minimum required income
- APR 12.99%
- No annual fee
- No minimum required income
[1]http://www.interest.com/credit-cards/calculators/credit-card-minimum-payment-calculator/
[2]https://www.ratehub.ca/credit-cards/no-fee
[3]https://www.ratehub.ca/credit-cards/low-interest
