Low Intro Rate vs Low Fixed Rate
When trying to pay off debt, many people decide to transfer their credit card balances to another card that offers a 0% intro rate, and too often overlook the benefits of getting a low fixed rate credit card. I’ve decide to put the two to a test and compare our most popular balance transfer credit card to our most popular low fixed rate credit card and see which one comes out ahead. For this test we’re going to assume you have $8,000 in credit card debt and your budget allows for $100 a month towards paying off this debt.
Your Existing Card
Before we take a look at low intro vs low fixed, lets first look at the cost of doing nothing. By leaving the balance on your credit card with an average rate of 14.99% you will pay $1,032 in interest to pay the card off.
The Low Fixed Rate Card
Our most popular low fixed rate card is the MERRILL+ Card. It offers a 9.99% fixed rate and also includes a 12 month intro rate of 1.9%. With this card you will have $2,675 in remaining principal after the promo period and it will cost you a total of $248 in interest to by the time you pay off the card. A $784 savings over doing nothing.
The Balance Transfer Card
Our most popular balance transfer card is Blue from American Express. This card offers 0% intro APR for 15 months, afterwards the rate becomes a better than average 12.24% variable rate. With this card you will have $2,000 remaining in principal after the promo period and it will cost a total of $120 in interest by the time you pay the card off. A $912 savings over doing nothing.
It may come as a surprise to you that the low intro rate came out ahead. That’s because of the jump start you are able to get on paying off your debt in the beginning. Just like with a mortgage, paying off credit card debt is very slow at first and the accelerates as you get closer to paying it off. Due to the 4% monthly minimum payment that almost all card companies require now, the low intro rate card comes out ahead regardless of the dollar amounts. However, this is only true if you no longer charge items on your credit card and truly do pay it off. If you plan to continue making charges, the low fixed rate is the better way to go.
