Loans tend to have a lower interest rate than credit cards for a number of reasons. Some loans are secured, which means that even if the loan goes wrong, the lender can still get their money back. With that margin of safety, most lenders are prepared to lend a higher amount at a lower rate of interest.

Another reason for a loan’s lower interest rate is the scheduled repayment basis, which reduces the administration costs for the lender. Finally, loans tend to be repaid over a longer period, which raises the total amount of interest charged even with the lower interest rate.

But credit cards have some advantages over loans as a method of borrowing. They are more flexible, which means they can be repaid more quickly, and in difficult months a lower amount can be tendered. They are not secured, which means the family home is not at risk. In fact, it seems the only disadvantage to credit cards, from the borrower’s perspective, is that high interest rate.

But even there, some credit cards charge an interest rate roughly equivalent to that of loans. These do have all the advantages of credit cards, but there are a number of features that need to be addressed.

The most important feature to consider, when selecting a low interest credit card as an alternative to a loan, is the interest rate being charged should remain low for a long time, preferably the lifetime of the card. Some credit cards offer a low interest rate, but only for the first few months the account is open, making it inferior to a loan for long-term borrowing.

It’s also important to be disciplined with these cards. Loans impose a form of repayment discipline with their structure and schedule, and a similar effort should be made with a credit card when using it as a loan. The card holder should make an effort to repay as much of the outstanding balance as possible each month.

Finally, if the credit card is chosen as a consolidation or balance transfer loan, there should be no spending on the card until the transferred balance has been discharged, as the spending will be charged interest at a higher rate. As well, if the low rate is on spending, there should not be a balance transfer made to the card.

Nowadays the interest rate which companies advertise will often be devised simply to attract customers. Lenders, for example, will advertise a card at a 4.99% introductory rate on a product that has a usual standard rate of 22.49%. Because the 4.99% rate may be more appealing than a competitors introductory rate of, for example, 9.99% (with a standard rate of 17.99%), unsuspecting borrowers will not acquire the card which offers them the better overall deal.

Furthermore, the interest rate advertised may actually be the purchase interest rate, whereas different interest rates are charged on balance transfers and cash advances. When balance transfer rates are lower than the standard interest rate, the balance transfer rate will be advertised by the lender. Credit card users who are led to believe that they will forever enjoy a low interest rate on their balance may soon find  that the standard rate is greater than their previous credit card.

Cash advances are also subject to a totally different interest rate, on 90 per cent of the credit cards on the market. The remainder charge the same rate on cash advances as they do on purchases. Cash advance rates can be excessive. It is common for lenders to charge up to an additional 5% (in excess of the purchase rate) on cash withdrawals from a credit card.  Moreover, cash advances are frequently not assigned to an interest free period, whereas many purchases are awarded 44 – 55 days of interest free periods to make full repayment. As interest begins accruing on day 1, the interest expense on a “low rate” credit card can mount very quickly.

Because credit cards charge different interest rates on various transactions they do not guarantee that a borrower will pay less in interest expenses. Lenders allocate interest repayments to the lower interest accruing transaction first so when customers make a cash advance the advanced funds will be left on the balance accruing around 24.99% interest until such times that all purchases are repaid in full. If credit card users constantly use their card for purchases, this transaction can be left on the card indefinitely leaving the borrower to pay large amounts in interest.

Credit card users should keep their eyes on the bottom line and pay more attention to the interest that will be paid over a long period of time and not just in the short term.

Millions of individuals get turned away from companies when applying for a credit card due to poor credit history. So how important is having good credit history? Having good credit is very important for many low interest credit cards. Having a bad credit score can mean that a low interest credit card is less likely to be issued to you.

Credit card lenders have found that one of the best indicators of how a person will do with credit in the future is what they have done with it in the past. This is collected by the credit bureaus and used in various metrics, the best known of which is the credit score.

The biggest risk with most credit cards is that the borrower will default, or will need to be carefully managed to avoid a default. Having bad credit is an individual risk however over time it can affect large group of users due to cost. This means that by reducing the amount of card users are likely to default then the credit card issuers are likely to reduce the costs of these credit cards.

Issuers offer low interest credit cards for many reasons however it is fundamentally to attract business and help pay for rewards programs.

This means that in order to obtain a low interest credit card a good credit score would be necessary to prove that you are trustworthy of being a loyal customer.  There are a number of ways to improve a credit score.

One of the most obvious ways of improving a credit score is to access credit records.  These are provided at very low cost by a number of credit bureaus.  If there are discrepancies that are wrong on the credit score then the lender or utility can be contacted and asked to remove the reference on the credit score.  If there is a disagreement and this will not be removed then a note can be added to the file explaining the borrower’s point of view.

Other things to look for are incidents that are more than seven years old. If the credit reference does include this then they can be asked to remove these as they can now be considered redundant.

The other thing that can be done, although this is a long-term matter, is to take out a small loan and repay it diligently and never missing a payment date.  This can do a lot of good to a credit score and open up cheaper forms of credit.

However it would be inappropriate to purchase goods for your business or company using a personal credit card.

You must understand what your options are for the payment plan regarding the business credit card.

It is important to understand beforehand what your minimum monthly payment will be as well as the general terms and conditions of the credit card. Fortunately, many credit cards come with additional benefits and low interest rates so you can avoid debt issues.

It is critical that you choose a business credit card that is most appropriate for your company and the business you are running.  A business credit card helps ensure that entrepreneurs avoid facing financial risks by meeting the needs of your business. The best way to figure out which card is best for your purpose is to determine where you can get other money from, examining your monthly expenses for the business and how you will manage to pay the balance every month.

Another essential element to owning a business credit card is to ensure your credit score/rating is good. This allows you to have better access to loans. As a result you will also be entitled to financial options such as the right to open new additional accounts for credit cards.

A trap into which many new business credit card owners fall, are introductory offers. If a credit card company offers you a low interest rate but only for a short period of time, you must understand once the period has come to an end, you will be required to pay the standard interest rate applied. This could be damaging to your business as you could be paying for unnecessary expenses.

Finally it is important to have organizational counts. In this instance you are able to separate your accounts for business and personal use. This allows easier tracking of your money and makes organizing your finances a more convenient task. It also assists your accountant in maintaining and keeping track of your business books.

Here are five quick and simple tips that could pave your way to a stress free financial future:

Number 1: The beginning of all stress for credit card owners is racking up debt! Most people like to pride themselves on saying that they can avoid debt so owning a credit card is easy. However this phrase is a lot easier said than done! Almost all individuals who own a credit card, at some point or another, end up in a situation where money is tight and they struggle to pay off their credit card bills. So the number one tip is that you aim to pay your bills on time. This may mean that you have to budget throughout the month and spend less on wants and spend more on needs. You should aim to pay the entire balance completely every month and not just portions of it. This not only means that you are avoiding racking up debt but you are also effectively improving your credit rating which goes to show that you are a reliable and valued customer for companies. If however you can’t manage to pay the balance in full, you should aim to try and cut down your expenditure for the next couple of months. This will help reduce the overall amount you owe. You should also thoroughly check your credit card statements every month to be sure that your expenses are correctly being charged to your card.

Number 2: To avoid paying higher interest, switch to a lower interest card. If your company offers balance transfers, it would highly appropriate to change to a card which offer you better rates. This means that you will be paying less in interest over the long run, saving you a whole heap of money!

Number 3: People always underestimate the power of negotiation. What people fail to realize is that some companies are willing to negotiate deals but they won’t offer it unless you ask first! So ask your lender if they can offer you any lower rate deals, bonuses, incentives or rewards on the service you are with. Asking this simple question can sometimes go a long way to save you money and stress!

Number 4: This may seem like an obvious action but so many people still lapse and fail to do this- securing your credit card. Sharing your credit card details is the most risky thing an individual can do. It is important to safe guard all your details including things as simple as your name on your card and your card number. Therefore cut up old credit cards or ones that you don’t use and avoid sharing your account details with anyone!

Number 5: Finally Shop around! Most people jump into owning a credit card with researching, understanding and considering all their options. This can be the biggest mistake which can lead to your financial downfall. And the truth is that this is one of the first easiest steps that could save you a lot of trouble in the long run. So be credit wise, and step out, shop around then make your decision.