There are a million and one credit card companies and the competition for your wallet is fierce. In our capitalist economy this type of competition is good for the consumer because companies must constantly better themselves in order to stay in business. An excellent example of the benefits consumers receive as a result of this competition among the credit card companies are the zero percent credit cards.
There are several types of low interest credit cards however two of the broader categories would be the 0 apr on balance transfers and the 0 apr on purchases for a specified period of time.
A zero percent interest on balance transfers card is a great way to refinance your debt. Say you have a credit card that is maxed out and you are paying ten percent interest on your balance. If you transfer the balance of that card to a zero percent credit card you immediately save a huge amount of money by ridding yourself of the entire ten percent interest charge every month.
A zero percent on purchases card is a great choice for anyone. These cards will offer no interest on purchases for a set period of time. Interest can be a wallet killer so any type of loan that boasts no interest, for any amount of time, is a good thing. These cards usually have a time period, some up to eighteen months, after which interest will begin to be applied to the balance. If managed properly, this gives the borrower a significant amount of time to either pay off of make good progress on paying off the balance before the interest is applied.
As with anything, especially your money, don’t get carried away on purchases. Be careful not to procrastinate making payments just because you are not required to do so. Also, don’t fool yourself into thinking you can game the system with the rotating card game. I have read about some very dangerous tactics that on the surface sound like they may work, however after just a little bit of deeper contemplation, the holes in the idea become evident.
For example, you could get a few cards and spend the money, then just keep transferring the balances to zero percent credit cards or the no payments for twelve months cards indefinitely and theoretically never have to make a payment for years on end. Sounds great, but, each time you apply for a credit card there is an inquiry into your credit history. Each inquiry is recorded on your credit report as well as the totals of all your debts. It won’t take very long for the loaning companies to figure out what you are up to and before long you will have a terribly low credit score and will not be able to get approved for more credit. You will then have to pay the piper and you will have a giant list of creditors on your report. Even if you eventually pay off the entire balance on all the cards, creditors do not like to see that huge list and you will then have to go through the painstaking long and involved process of clearing up your credit report.
Zero percent credit cards are very convenient and can be quite helpful if used modestly. However if used unwisely or with unscrupulous intent they can be the fast lane to your financial downfall.