112. Why Seek A Low Credit Card Rate?
Why is getting a low credit card rate so important?
You know that it’s not the only thing you need to look for, but it’s something you want.
Typically, credit card companies offer very attractive introductory rates (such as 0% for the first 6 or 12 months). But it’s very important to find out what the rate will be after the introductory rate period is over.
You want the power of compound interest to be on your side – not against you. When you get a low credit card rate, you are achieving this.
To get a quick idea of how important this is, let’s go over the following two points.
On both occasions, let’s look at things from the other side of the glass…you don’t owe so you’re not paying anybody else…here, you’re paying yourself.
#1: Learn the Rule of 72 and use it wisely.
What is the Rule of 72?
Let’s say you manage to save $10,000. How long will it take to double your money?
The Rule of 72 tells us that if you divide the number 72 by the interest rate, it’ll give you the approximate number of years it’ll take to double your money…
In looking at the chart, you’ll see that if the interest rate is 2%, it’ll take approximately 36 years to double (72/2 = 36).
On the other hand, if the interest rate is 12%, your money will double in approximately 6 years (72/12 = 6)!
#2: Learn about the power of compound interest.
Let’s say you manage to save $300 a month for a total of 30 years. What will you have at the end of those 30 years?
Again, it all depends on the rate.
Do you see the power of compound interest?
Of course, the chart doesn’t take taxes or other deductions into consideration and does not promise a guaranteed rate, but you get the point.
And obviously, banks and lenders not only understand the power of compound interest, they use it for their benefit.
What do you see when you enter a bank? Nice furniture and luxury – benefits of Mr. Compound Interest.
Over the years, they’ve done very well (and will continue to in the future) because they have analyzed and learned new ways to reap benefits.
They may come up with an irresistible low credit card rate to get you to consolidate with them.
Once you become a customer by accepting their credit card offer, the game begins. Some companies are customer-focused and play fair, others don’t.
Either way, you need to make sure that you get to benefit too. Mr. Compound Interest can be a great friend or a ruthless enemy – your choice.
Obtaining and keeping a low credit card rate is just one example of how you can use it to your benefit.
With the money you’ll be savings in interest, you can pay yourself and continue to reap the benefits of compound interest.