Low interest rate credit cards are the best way to manage medium size purchases.

These cards are the ones that are offered with the low Annual Percentage Rate calculated on your outstanding monthly balance. At one time I was the target market for this card so my story is the best way to explain this type of card.

I found that I used one when I found it convenient to carry a balance on a credit card. I was not ready for a line of credit but I wanted to manage some purchases that were too large to absorb in my budget in one payment. I did not want to have loans or credit at the department store, the furniture store and every other store. I just wanted one major credit card that I could buy some household things and pay them off over a short term.

This card is for that time in your financial development. You have good credit but the wants and needs of your growing family require you to take on some purchases. You don’t want to be constantly filling out loan applications every time you buy something and you don’t want to pay the high interest rates that are charged by store credit cards. Even if they offer you nothing down and 0% interest until Shrove Tuesday three years from now, you know you want to put the debt to rest sooner rather than later. You also know that the financing costs are buried somewhere in the purchase price of that furniture.

Normal interest rates on credit cards start on or about 19.5%. Because you have good history, the credit card company will give you a rate that is about half that. Depending on how good you are at shopping and how much help you get from your banker you should be able to eliminate startup or monthly/annual fees. They will make enough from the retailer to cover most of the costs. Another reason you will get the preferred interest rate is because the credit card company knows that they will not have to spend money trying to collect the money you owe them. Every time they send out a late payment reminder it costs them money. If they do not incur that cost, they will pass that savings on to you. They want to pass the costs on to those who are a high risk to miss or fail to pay.

You are the guy who has not lost sight of the fact that you need to have a plan to pay off your debts. Your budget has lines for planning spending on home furnishings, home repairs, and major appliances. This is in your planning budget and you can now put it into a monthly amount on your reality budget by spreading the cost of buying a new washer over 6 months for example. That is about $100 and then you have that budget slot free for another major appliance or piece of furniture. It is more like a short term loan rather than a credit card. On your balance sheet you will start with a liability but this will diminish and then disappear as you pay off the loan. On the asset side of your balance sheet you have a soft asset that can be turned into cash for $.30 on the dollar if you are in a pinch. It is not a strong presence on your balance sheet but you do have something for the money spent.

These sorts of purchases help your family life and other facets of your well being. Financial Therapy is not 100% about your finances. It is about your home, your family and your future.

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