0% APR Credit Cards: Don't Mess Them Up
If you have high interest credit card balances or need to make a high-ticket purchase, 0% APR credit cards can look like the best option. Paying off old credit card balances interest free is a great way to get out of debt, but only if you don't mess it up! Here is what the banks hope you don't know about 0% APR credit cards:
Holiday Spending Sprees
People generally use their credit cards more around the holiday season. Banks and credit card lenders are well aware of this habit, and send out many more no-interest credit card offers from November to January. The banks also realize most people don't take the time to study the fine print of every credit card agreement. At the bottom or back of almost every 0% APR credit card offer you will see information regarding the adjustment of your interest rate to the full annual percentage rate if you make a payment after the due date. Making a payment after the due date is the fastest way to pay more than you expected on your transferred balances.
Understanding the Terms of the 0% APR
Another way to mess up your no-interest credit card offer is to forget the 0% interest is only an introductory or promotional rate. Even if you make all of your payments on time, there will come a day when the 0% interest expires, and the balance will then be subject to the regular interest rate of the card. When you are making plans to transfer high interest balances to a new 0% APR card, it's important to understand how long your new card will provide the 0% interest rate. Some credit cards will provide the offer for six months, while others are for 12, 18 or 24 months.
If you can't pay your transferred balance off completely during the terms of the 0% APR period, you need to figure out if you will save money on the remaining balance after the introductory period and while you're paying the higher interest rate before signing the credit card application. If the regular interest rate of your new credit card is going to be quite a bit higher than the card you currently have, there is a good chance that you'll end up paying more for the transferred balance if you consider the balance transfer fee and interest beyond the 0% promotional period.
Ideally, you will want to transfer high interest credit card debt to a card that offers 0% interest for enough months to allow you to completely pay off your debt. If the transferred balance is too high to pay off during this time period, at least look for a 0% APR balance transfer offer that has a regular interest rate at least 3% lower than the APR you are currently paying.
Holiday Spending Sprees
People generally use their credit cards more around the holiday season. Banks and credit card lenders are well aware of this habit, and send out many more no-interest credit card offers from November to January. The banks also realize most people don't take the time to study the fine print of every credit card agreement. At the bottom or back of almost every 0% APR credit card offer you will see information regarding the adjustment of your interest rate to the full annual percentage rate if you make a payment after the due date. Making a payment after the due date is the fastest way to pay more than you expected on your transferred balances.
Understanding the Terms of the 0% APR
Another way to mess up your no-interest credit card offer is to forget the 0% interest is only an introductory or promotional rate. Even if you make all of your payments on time, there will come a day when the 0% interest expires, and the balance will then be subject to the regular interest rate of the card. When you are making plans to transfer high interest balances to a new 0% APR card, it's important to understand how long your new card will provide the 0% interest rate. Some credit cards will provide the offer for six months, while others are for 12, 18 or 24 months.
If you can't pay your transferred balance off completely during the terms of the 0% APR period, you need to figure out if you will save money on the remaining balance after the introductory period and while you're paying the higher interest rate before signing the credit card application. If the regular interest rate of your new credit card is going to be quite a bit higher than the card you currently have, there is a good chance that you'll end up paying more for the transferred balance if you consider the balance transfer fee and interest beyond the 0% promotional period.
Ideally, you will want to transfer high interest credit card debt to a card that offers 0% interest for enough months to allow you to completely pay off your debt. If the transferred balance is too high to pay off during this time period, at least look for a 0% APR balance transfer offer that has a regular interest rate at least 3% lower than the APR you are currently paying.
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