Have you ever received one of those tempting invitations to apply for a low-interest credit card? Before you sign on the dotted line, it’s crucial to arm yourself with the right information. A few years ago, Greg Lipinski found out the hard way just how important it is to read the fine print. He jumped at the chance to sign up for a couple of low-interest credit card offers, but he didn’t take the time to fully understand the terms.
“My applications were accepted almost instantly, and I got my cards within a few weeks,” Lipinski recalls. “They even gave me huge credit limits, which I thought was awesome at the time. Then, after a year or so, the APRs skyrocketed, and I couldn’t keep up with the payments. My credit was completely messed up.”
Lipinski’s experience isn’t unique. Many young Canadians, eager to build a strong credit history, fall into the same trap. What they often overlook is the fine print—those tiny details that spell out how the interest rate will jump once the introductory period ends. If you’re not paying attention to when those intro rates expire, you might get caught off guard, which can be devastating if you’ve been using your card freely. But don’t worry—there are ways to protect yourself from these interest rate hikes.
After racking up tens of thousands of dollars in debt and having to ask his mother to co-sign a loan to pay it off, Lipinski finally took a closer look at one of those low-interest credit card offers. What he found was shocking.
“I was so excited to get the card that I didn’t realize my interest rate would go from 1.5 percent for nine months all the way up to 29 percent after that! I had three cards with the same great initial rate and used them all, but when the rate skyrocketed, I had no way to pay off what I’d charged. I really wish I’d paid more attention.”
To make matters worse, Lipinski started using one credit card to pay the monthly fees on another, creating a vicious cycle. While this strategy might keep your credit history intact, it won’t do much to get you out of debt.
So, what can you do to avoid falling into the same trap? Here are a few tips:
- Read the Fine Print: Those credit card applications that flood your mailbox do include details about what happens after the low-rate period ends. The information is there, but it’s often buried in tiny print that most people don’t bother to read. Take the time to understand exactly what the card offers and how things will change after the introductory period.
- Do Your Research: Check out the websites of major banks like TD Canada Trust or BMO. They offer lower-rate cards for students, businesses, or wealthier clients, with rates as low as prime + 1.9 percent. These rates usually stick with the card and don’t change unless the cardholder abuses their credit. Many of these low-rate card companies help people establish or rebuild their credit history, but be careful not to jump at the first offer you see. Shop around for the best one.
- Choose the Best Options: Look for a card with the lowest initial rate, the lowest permanent rate (what it will be once the introductory period ends), and no annual fee. Remember that these companies, including big banks, make their money off interest and fees, so keep your eyes open for the best deal.
- Talk to a Representative: Don’t just rely on the information provided in the mail. Speak with someone, ideally a manager or someone higher up who isn’t just trying to get you to sign up. Ask about their rates and what they can offer you. Let them know you’re shopping around for the best deal, just like you would when making a big purchase like a car or furniture.
- Stay on Top of the Introductory Period: The rate change will happen without warning, often calculated from when your application is accepted, not when you receive or activate the card. Make sure any balance you carry is paid off before the rate changes to avoid getting hit with higher interest charges.
Finally, the most important advice is to only use the card if you can pay off what you charge on it quickly. Don’t get stuck in a cycle of paying only the minimum on a large balance, especially with high interest rates. Once you’re in that cycle, it’s tough to get out. Lipinski learned this lesson the hard way: “If I’d known then what I know now, things would have turned out differently. I’d probably still have gone for the low-rate card, but I’d have only picked one instead of three, been more careful with using it, then kept it at zero unless I needed it. Live and learn, I guess.”
American Express Essential Credit Card
RBC Visa Classic Low Rate Option
BMO Preferred Rate MasterCard
