Credit card companies are known for making solid deals to potential applicants. Everyone wants to save money or access a perk when using a credit card. High interest rates make saving money on charges difficult. 0% interest introductory rates, however, are as good as using cash provided the balance on the card is paid off before the interest rate changes.
Access to no-interest introductory offers are also attractive to borrowers who already are suffering from costly balances. Transferring the balance of a card with a 19% interest rate to one with a 0% interest rate absolutely can lead to saving a nice sum of money. Money only ends up being saved when the approach to using the 0% interest card is both strategic and based on solid economical sense.
Know the Duration
Fully knowing the exact amount of time the 0% interest period is afforded is necessary to get the most out of the card. The terms are sure to be fully spelled out on the application. There won’t be any ambiguity about how long the card is sans interest. If the term is 12 months or 18 months, this will be mentioned. Knowing how long one gains access to a “freebie” credit card allows for maximizing its benefits. Maximizing the benefits comes in the form of avoiding paying any interest.
Look for Fees
While a particular card may come with a 0% interest rate, other costs might be associated with the account. An annual fee may be required. For balance transfers, a 2% transaction fee may be levied. The 2% transaction fee would be akin to a one-time 2% interest charge. The dollar amounts pretty much work out the same way. Charging fees, quite honestly, is not automatically a bad thing as long as the credit card company is clearly upfront with the costs.
Due to regulatory laws and requirements, the credit card companies are not likely to hide their costs. The applicant does have to read the notations about terms and fees to discover their existence. Skimming an application may lead to unwanted and avoidable surprises when the billing statement arrives.
Plans for the Credit Cards
New card holders can use their accounts for any reason they see fit. Using the cards for various monthly charges and paying off all or some of the balance is acceptable, but there may be better uses for the cards. The aforementioned balance transfers intended to curtail costs on more expensive cards definitely is a workable plan. So is charging something costly that cannot be paid off in a month or two. Major automobile expenses or even a long-desired vacation would fall under such a delineation.
Avoiding the Interest
For those who are not able to pay off the entire balance of the credit card, an option exists. The balance can be transferred to another 0% card. No, there are no rules barring how many transfers a card holder can perform. The time may come when no more 0% card offers are available. Borrowers should not assume they will automatically perform this action year after year.
Still, if a borrower charges $5,000 and pays back $4,000 prior to the introductory period expiring, paying interest on $1,000 is a better deal than paying interest on $5,000.
The goal of anyone using a 0% interest card should be to save money. Anyone who procures the card and spends negligently and ends up rolling over an unpaid balance into new terms with higher interest rates is only taking him/herself down the path of financial troubles.
A special word of warning must go to those who do not understand what “deferred interest” is. This is a clause that mandates retroactive interest on any card that does not have a zero balance at the end of the introductory term. In other words, if $4,900 is paid off on a $5,000 balance and the introductory period ends, the remaining $100 leads to being charged full interest on the entire $5,000. Again, always read terms and conditions when using any credit card.
The best possible advice is to be fiscally smart with any credit card regardless of the terms, interest rates, or promotional offers. Otherwise, the card is going to end up much more costly than anticipated.