Charles H. Miller
Cards with 0% APR may sound too appealing to be true. In fact, these products generally follow the same rules as other, regular credit cards. Using them irresponsibly could ruin your credit score and leave you with debt to deal with months after the introductory period of 0% APR has expired. As with pretty much any other financial product/service, you should first educate yourself a bit. Here are 4 things to know about credit cards offering 0% APR.
1. You must make the minimum payment every month
Just because you got yourself a credit card with 0% APR doesn’t mean you can forgo monthly payments. In fact, your 0% APR period could be cancelled if you fail to make minimum payments every month — usually a small percentage of your balance. Failing to do that could get you back to the regular (ongoing) APR, pretty much turning a 0% card into a regular credit card (without the interest-free benefit). Also, missing payments could hurt your FICO score, causing that much more headaches in the future.
2. 0% APR doesn’t last forever and may not cover both purchases and balance transfers
As briefly mentioned in the previous point, credit card issuers offer an introductory period of 0% APR, after which you get back to the regular (ongoing) APR. While in that period, you should try to pay off your debt or fund some big purchase. But, you should also read carefully whether 0% APR applies to purchases, balance transfers or both. Typically a different APR is applied to cash advances and penalty rates (when you are late with you monthly payments).
3. Remember to use less than 30% of your credit limit
It is not our suggestion — it is what FICO recommends to keep your credit history “clean.” The amount of money you owe accounts for 30% of your FICO score with any card, whether it offers interest-free purchases or not. So avoid making too many big purchases in a short period of time to keep your credit history intact. It could hurt otherwise…
4. You may not be reminded to pay off your balance…
…yet, you will be charged interest on any outstanding balance once the clock runs out. Your credit card issuer is not obligated to remind you that the 0% APR offer will expire in, say, 7 days. Even if it does remind you, you should add the date to your own calendar to pay off any debt you may have on the card on time. After the introductory period of 0% APR expires, your card usage should change accordingly.
Ready? Go for it!
Now that know the basics, you are good to go. However, with so many choices on the market, it doesn’t get easier from here. There are many cards offering 0% APR for a number of months, and selecting the right one can be a pain. Perhaps the links below this article could help you discover the card that works best for your unique needs. Check it out.
