What to Look for in 0% Interest Rate Offers
Credit cards with introductory 0% interest rate offers on balance transfers and spending are an important part of personal financial management. They can help to save you thousands of dollars in APR (annual payment rate) spending each year and allow you to manage debt without incurring more debt.
Credit Card Management
In order to take full advantage of 0% interest rate offers it is crucial to manage your credit cards wisely.
One of the possible dangers with 0 percent interest rate offers is that the credit card holder may forget the date the 0% interest rate offer expires. At his point the regular ongoing interest rate "kicks in" and it can be a potentially high APR interest rate, higher than you would normally like to pay. In addition, the credit card holder may have taken on additional debt during the duration of the 0% introductory time period in order to take full advantage of the offer. This additional debt should be reduced before the introductory 0% time period is over in order not to incur excess interest expenses. So the moment you begin a 0% introductory offer, get out your diary and mark down when the offer ends.
It is also important to know the balance between debt and account use. Offers of 0% on credit cards can tempt people to open more accounts than they actually need. Having a large number of open credit accounts at 0 percent can damage your credit rating.
In order to enjoy the benefits of 0% interest rate offers without damaging your credit rating, be modest about the number of accounts you open. It is beneficial for your credit rating if you are using less than 25% of your total credit allowance on any card, so try to manage your accounts so that you stick below 25% of the allowance at 0% interest. You may be able to increase your credit limit to accommodate the 25% rule without opening further credit card accounts.
Be sure and pay the minimum payment requirement each month on time in order to not incur extra fees and possible cancellation of the 0% interest rate offer.
0% Interest Rate Credit Card Offers:
Read the Contract Carefully before you Apply
You should check the small print in the terms and conditions section of the contract when applying for a 0% interest rate credit card offer; they may not mean exactly what they appear to be saying. Some offers may apply only to balance transfers and not to new account spending or vice versa, the offer may apply only to spending and not to balance transfers. Other contracts may carry very specific clauses that instantly invalidate the 0% offer if you make a late payment or do not spend a minimum amount each month.
Another common theme is that the length of time that 0% interest rates are offered may not be the same amount of time for balance transfers as for spending. Some cards may offer a six-month 0% interest offer on spending but a nine-month 0% offer on balance transfers. Make sure that you write down both of these end dates to avoid confusing them. If you are still spending seven months into the introductory offer believing you have 0 percent impunity, you will be in for a big surprise.
The 0% interest rate offer may also be affected by your credit rating. You may apply for a twelve-moth 0 percent offer, but end up being granted only a six-month 0% break if you have a below-average credit rating.
Beyond 0% Interest Rates
Don't forget that a bank is a business. Banks prefer credit card holders who pay only the minimum monthly amount due whilst remaining in debt, over those who pay off their debts in full each month. This is how they make money.
Banks make money when card holders forget to move their accounts once the 0% interest rate offer has expired. In fact if you maintain a credit card beyond the introductory offer you will boost your credit rating. If you switch to another 0% credit card offer once your existing 0% offer is over you may lower your credit rating.
In light of this, it is worth considering taking out a low APR percentage credit card and persevering with it beyond the 0% introductory offer. Loyalty to credit accounts can, if managed well, lead to a much higher credit rating which in turn brings benefits of lower interest rates and higher spending limits.
In addition it may be possible to get better credit deals from your existing credit provider. 0% interest rate offers were once the sole domain of new customers but today banks are becoming increasingly interested in keeping customers. In order to help stem the account switching tide that 0% interest offers have encouraged, some banks now offer existing customers drastically reduced APR plans. It is worth asking your bank about this before you make your next 0% switch.