0 percent APR credit cards: The basics
But smart credit customers can avoid these balance hikes with a little planning and some prudent money management. Here are a few details to consider when you're shopping for a 0 percent APR credit card:
- Your credit rating can affect the duration of the no-interest introductory rate, as well as whether you qualify for 0 percent interest rate credit cards in the first place.
- The credit company's terms and conditions might restrict the 0 percent offer, resulting in different interest rates and fee structures for purchases, balance transfers and cash advances.
- It helps to pay attention to your income-to-spending ratio, since many 0 percent interest credit cards reset to a fairly high rate when the promotional period expires and you don't want to be left holding a considerable balance on a card with a high APR.
If your credit rating qualifies you for 12 or 15 months at the introductory rate, and if your cash flow is strong enough to ensure a complete balance payoff by the end of the promotional period, 0 percent APR credit cards can give you a welcome break from perpetually rising balances.
Making the most of 0 percent interest credit cards
After you've been approved for a 0 percent APR credit cards, there are a few tried-and-true ways to get the best value from it. The effectiveness of all personal finance techniques depends on earnings, discipline, and other individual factors, but these guidelines can apply to credit customers in nearly all categories.
- Debt consolidation – If you're carrying balances on multiple credit cards and have confidence that a break from interest can help you pay off the whole amount, bringing those balances together on a 0 percent APR credit cards can help you do it. Just make sure to check the limit on your no-interest card before pulling the trigger.
- High-APR balance transfers – Any outstanding balance you might have on cards with an APR of 20.99 percent or more are great candidates for transfer to 0 percent interest credit cards during their promotional period. Check to make sure that the introductory rate on your new card doesn't come along with transfer fees, though, or the interest savings might just cancel out.
- Big-ticket purchases – When you charge expensive items to 0 percent APR credit cards, you allow yourself a nice cushion of time during which the money you spent will be your only liability. It's best to budget a bit before doing this, however, since the balance on your 0 percent credit card will transform into regular credit card debt at a higher APR when the introductory period ends.
The bottom line on a 0 percent interest credit card is similar to that of any credit instrument: You should pay close attention to the details of the offer before you seek it. If you let the promotional rate expire, or if you overlook fees or restrictions on the credit card application, you might find yourself paying out more than you can handle. But when used properly, a 0 percent card can be a great tool for effectively reducing your debt or making a large purchase.