Credit cards are often seen as a particularly good way to borrow in the short term. However, if done in the right way they can also be a good way to borrow in the long term. This is dependent upon choosing the right sort of card, as this will make all the difference in how the card is used.
There is a certain amount of truth in the idea that the normal credit card is not a good way of borrowing money in the long term. This is because normal credit cards carry a high rate of interest and so the cost over the long term can be astronomical. The interest rate, therefore, is the prime consideration when choosing a credit card for borrowing over the long term.
While it is true that not all credit cards are good for long-term borrowing due to their interest rates, it is also the case that a credit card has certain features that are attractive to a long-term borrower.
For a start, the long-term borrower should appreciate the flexibility of a credit card, which can be important when repaying debt. If funds are tight, the minimum repayment can be made. But in months where more funds are available, if for example a bonus or large commission has been received, a larger sum can be repaid toward the balance. In fact, it’s a good idea not to rely on minimum payments except in one-off situations as interest builds up quickly.
Another advantage of credit cards for long-term borrowers is that they are unsecured. If the payments can’t be made regularly, at least the house or another asset is not at immediate risk.
The sort of card that a long-term borrower should seek is one that offers low interest rates over the lifetime of the credit card. There are a number of cards that offer this benefit, but they tend to be no frills credit cards without other benefits such as free travel insurance or a rewards program.
