Finance experts often give conflicting advice, but there’s one bit of advice that most agree upon. If you use credit cards, you should watch which one you use for which type of purpose. The one that you use to pay for your day to day expenses is not necessarily the best card to use for your long term purchases.
Every credit card has certain terms and conditions. These include the annual percentage rate (APR), which tells you how much interest you pay on your outstanding balance. When you’re choosing which credit card to use for expensive purchases, this is the single most important factor. Let’s take a look at different types options available to see why.
While there’s a lot of cross-breeding among the various card types, most emphasise one benefit at the expense of another. After all, the credit card companies have to make a living, too. That means that an offer of rewards for using the card usually makes it up by making you pay a higher rate of interest on carried balances, or an annual membership fee, or both. Meanwhile, the low interest credit card most often offers no other benefits for its use because you’re saving money on your carried balances. For example:
The Cahoot credit card offers a typical interest rate of 11.8% – nearly two/thirds lower than the most expensive cards. There’s no annual fee, and no reward points or cash back on your purchases.
The Marbles credit card, on the other hand, will cost you 15.9% typical APR for carried balances, but will give you .5% cash back on every single purchase.
Let’s take a look at what a