TORONTO (CU)_It is no secret that credit cards charge painfully high interest rates. Usually their rates vary between 20 and 24 per cent, and if you’re carrying a balance this means it may take you some time to pay it off. According to personal finance expert Barry Choi there are a few quick ways in which you can tackle this situation.
Firstly, he recommends checking with your financial institution if you qualify for a line of credit. If you do, his advice is to take the funds and pay off the balance of all your credit cards, since interest rates on your line of credit is usually a few percentage points above the bank’s prime rate, varying between 4 per cent and 7 per cent. However, it is also possible that you may not be approved for a line of credit. In such a situation, Choi recommends getting a low interest credit card instead.
“As the name implies, low interest credit cards come with a low interest rate,” he wrote on the Financial Post. “These days, you can expect the interest rate to range from 8.99 per cent to 12.99 per cent. That’s less than half of the interest rate that some regular credit cards charge.”
He noted that one of the most attractive features of low interest credit cards is that some of them come with a balance transfer option which gives you an even lower interest rate. “For example, you might pay zero per cent interest for 12 months if you transfer an existing balance to your new low interest credit card,” he wrote. Accordingly, you can make a balance transfer and they focus on debt repayment, which enables you to greatly reduce the overall amount of interest you pay. And once the promotional period ends, you will be paying the regular low interest rate, “so it’s a win-win for you,” he said.
Choi recommended several low interest credit cards, including MBNA True Line Mastercard, which has a promotional annual interest rate of zero per cent for 12 months, following which you’ll pay 12.99 per cent interest. The Scotiabank Value Visa Card, on the other hand, offers a promotional interest rate of 0.99 per cent for balance transfers for a period of 6 months, followed by a standard interest rate of 12.99 per cent.
Another option recommended by Choi is the BMO Preferred Rate Mastercard, which has a balance transfer promotional rate of 3.99 per cent for a period of 9 months. After that, it returns to the standard rate of 12.99 per cent. You may also consider the HSBC +Rewards Mastercard. Although there is no balance transfer promotion on this card, its regular interest rate stands at 11.90 per cent. Moreover, you will be earning HSBC Plus Rewards points on all your purchases, which means you can earn rewards while paying off your debt.
