Low Rate Credit Card Offers

If you're like most people, you've probably received offers for 0% interest credit cards. These offers usually show up in your mailbox covered in brightly-colored numbers and exclamation marks. But if you delve into the envelopes and take a look at the details, you'll notice that low-interest credit cards are usually reserved for people with excellent credit scores.

How Are Interest Rates Determined?

When you apply for credit, lenders look at your credit score. This score is a 3-digit number ranging from 300 (poor) to 800 (excellent). It represents your credit history: the timeliness of your payments, any defaults or delinquencies, judgments or liens against you, and so forth. The final score tells the credit card issuers whether or not they should take a risk by giving you a card.

That said, almost anyone can get a credit card of one type or another. But your credit score will determine whether you get a low interest rate or a high one. Less risk for the lender means lower interest rates for you.

For more information, and to view your credit score online, go to My FICO.

What's the Difference between Fixed and Variable APR?

APR, or Annual Percentage Rate, is the amount of interest you pay on balances that are carried from one month to the next. A fixed APR doesn't change very often. When it does, the credit card company has an obligation to let you know in advance.

A variable APR can fluctuate frequently. This type of interest rate is usually based on the nation's current prime lending rate. Your cardholder's agreement will contain information about the frequency of changes to your interest rate.

Be aware that some cards charge a higher "penalty" interest rate for late payments. Cash advances and balance transfers can also be subject to different APRs. Always read the fine print of your card's terms and conditions.

Which Card Should I Choose?

That depends on your credit score and your spending habits. If you've got little or no credit, you might be able to take advantage of credit cards issued through your bank. If you've got decent credit and carry a monthly balance, go for the card with the lowest fixed APR and the fewest associated fees. Good credit opens the doors to lots of great credit cards; if your credit score is 720 or higher, apply for cards with the best perks and rewards.

Credit card companies often attract new cardholders with promises of 0% or low interest rates. Just remember to read your agreement carefully before you sign up. Low- or no-interest periods might be limited, or those rates might apply to only certain types of transactions. If a low-interest credit card offer sounds too good to be true, it probably is.