Compare Credit Card Interest Rates

To compare credit card interest rates, the debtor's credit score must be high and remain consistent so that they will be eligible for credit cards with low interest rates. For example: if a debtor has a credit score over 700, and their current credit card is offering a 15% interest rate, they should search out lower interest cards. These companies may advertise a 9.9% rate, but if the small print is read, it will also state intervals of raised rates, such as 12%, 14%, 18%, and 22%. The 9.9% interest rate is reserved for those with a credit score close to 800. These are the super high credit scores, that most people do not posses. The next credit interest rate is 12%, and 14%. Depending where the creditor draws the line, the person with a 700 credit score will most likely receive either rate. Both rates are lower when the debtor decides to compare credit card interest rates to the one they already posses. They may want to open an account with the lower rate credit card, and transfer the balance.

Many cards will allow a very low (1.5%) or 0% interest rate on balance transfers when opening a new account. Instead of closing the old account, it is important that the debtor leave it open, but don't use it, and keep its balance at zero. The open, but not used, credit card account has a limit that will help improve the credit score, when applying for loans or other types of credit. 30% of a credit reporting score is based on the debt to credit limit ratio. To effectively compare credit card interest rates, a debtor will need to know their debt to credit ratio. This means that if a debtor has a $10,000 credit limit combining all cards, and $2,000 in debt or balances combined, they would have a 20% debt to credit ratio. This is an acceptable ratio for being offered credit cards with low interest rates. If the debtor closes one of their credit accounts with a $5000 limit, they now have a combined $5000 credit limit with $2,000 in balances. To compare credit card interest rates when their debt to credit ratio has increased to 40% without adding any more debt can be fruitless. This is detrimental to the credit score, and finding credit cards with low interest rates will be hard.

Ideally, a debtor will want to stay below a 25% debt to credit ratio. Fortunately, if the debtor goes above the acceptable ratio, they can always strategically pay down their debt, and the credit score will be raised within 30 days, making them eligible for credit cards with low interest rates. The key to strategically lowering the debt is to make sure that each card individually has a 25% or lower debt to credit ratio. For example: on a $1000 limit card, do not have a balance higher than $250; on a $500 limit card, do not have a balance higher than $125; and on a $5000 limit card, do not have a balance higher than $1250. Even if the combined limits and combined balances total a less than 25% ratio, the ratio is applied to each card individually and the cards combined, so transfer those balances and spread out the debt. Other options are to get a consolidation loan with fixed payments and clear all the debt from the credit cards (but don't close the accounts). A consolidation loan (as long as it has a fixed payment schedule) is considered an installment loan, and is not included on the revolving line of credit debt to credit limit ratios.

Too many installment loans can be detrimental as well. As long as only house, car, and student loan installment loans are present...adding one more is okay. Any more than that and the credit score may begin to lower because of too many fixed monthly payments. Receiving credit cards with low interest rates is a good idea if the debtor plans on using them. While credit should not be used unless the debtor intends to pay it back the following month, our society has become dependent on the very nature of credit itself. Most people do not pay outright for their homes, cars, education, or traveling. It would be impossible for most people to own a home, car, or get an education without the use of credit. Since using credit is intertwined, not only in our economy, but in the necessities of life, caution should be taken when choosing a creditor or lender. The ultimate goal really should be to pay off our debt, not accumulate more. "Owe no man anything." (Romans 13:8)

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