There are many flavors of 0 interest credit cards, one of the more common offers is the 0 interest on balance transfers. It can be very easy to get carried away with these. At first glance it seems like a no-brainer, transfer you high or medium interest rate card to a 0 percent credit card and instantly lower the overall cost of the debt. This of course only works if you do in fact pay it off and don’t use the card for new purchases.
Using these cards for new purchases is a mistake since all your concurrent payments go towards the 0 balance transfers first while the new purchases sit there and accumulate interest until the entire transferred balance is paid. Many people do not realize this and assume the 0 percent is for purchases as well as the transfer. After a few statements they may notice the balance is not quite what they had expected. Always read the fine print!
On the other hand, if you do the 0 balance transfer and do not use it for new purchases and make payments on time you will definitely save money and in the long run your credit score will benefit as well. Keep in mind though that these 0 interest credit card offers have a time period after which an interest rate will be applied. Therefore the best way to use these is to pay them off before the time period is up and interest is applied. This is another fine print tactic that many people are not aware of until it is too late.
This can be done but you should have a plan in place before you embark on this path. As with anything, it always pays to do a little research before leaping into action. Some questions you may want to ask are:
- How long is the 0 percent offer valid?
- What is the interest rate after the offer period?
- What is the interest rate on new purchases?
- What is the fee for transferring your balance?
- Are there any penalties if payments are missed or late?
With these questions you can compare offers, develop a plan, and know what the consequences will be if you deviate from your plan.
When used properly, 0 interest credit cards can be the perfect tool for getting out of credit card debt. When used improperly they can be the perfect tool for digging yourself deeper into debt than you ever thought possible.