Credit cards use different promotions to entice you to use their services. One of the most common promotions is a 0% APR offer. This offer allows individuals to use a credit card without being charged interest on purchases or transfers for a set period of time, often between one and two years. This type of card can help you get out of debt. Smart consumers may save the amount of interest charged on their balance and use it to pay off their credit card balances.
Once the introductory 0% APR time frame has ended, you will be charged interest on the remaining balance. This interest is based on the regular APR which is often higher than many other credit cards. If you carry a balance on the credit card, the amount of interest will usually be more than average. In this case, switching to a 0% APR credit card may hurt you.
Pros of 0% APR credit cards
There are plenty of advantages to signing up for a credit card with a 0% APR. If you use this card strategically, you can pay off your debt without incurring more interest.
- Pay off credit card debt without interest – Eliminate interest charges by transferring the balance to the 0% APR credit card.
- No annual fees – There are rarely annual fees on cards with a 0% APR promotion.
- Finance major purchases – A 0% APR offer may allow you the opportunity to finance purchases that you otherwise may need to wait to buy.
- No balance transfer fee – Some cards don’t have a balance transfer fee. Be sure to check as the offers vary.
- Lower credit utilization – Adding a credit card will lower your credit utilization as you pay off your debt.
- Increase credit score – Your credit score will increase if you use the interest charges to pay off your debt. A lower amount of debt and a higher credit utilization will help improve your credit score.
Cons of a 0% APR credit card
There are some disadvantages to a 0% APR offer because you will still have to pay off the balance. A credit card without interest for a year may make you feel comfortable overspending, which can lead you into more debt. The following are disadvantages to this type of card:
- Higher regular APR – The regular APR is often high and goes into effect once the promotional offer ends.
- Easy to overspend – It may be tempting to spend too much because there isn’t interest being applied.
- Deferred interest – Store credit cards may involve deferred interest.
- Must have good credit – Most 0% APR cards are only available for customers who have good or excellent credit. Your score must be above 670 to qualify for most 0% offers.
Who should get a 0% APR credit card?
Not everyone is disciplined enough to use credit cards responsibly, but there are some people who will benefit greatly from an introductory offer of 0% APR. If you have any of the following situations, a 0% APR credit card may help you out financially.
- High credit card balances. People who have balances on other credit cards that they are working to pay off may want to consider doing a balance transfer to stop the interest on the current debt. A balance transfer will eliminate the interest that is accumulating on your current debt and allows you to pay off more of the principal balance.
- Entrepreneurial ventures. Someone who is opening a business may benefit from a 0% APR credit card. They may need to spend money on equipment or supplies to get the business going, but not have a predictable cash flow for a few months. The 0% APR credit card enables entrepreneurs to make business purchases to invest in their business without incurring interest until the introductory period is over. This should be done carefully as the business may not be profitable for months and you want to make sure that you have income to pay off the expenses.
- Major purchases. Individuals who plan on making large purchases like furniture, appliances, or electronics may benefit from a 0% APR card. It allows them a lengthy period of time to pay off the purchase without incurring interest charges.
Who should avoid 0% APR offers?
You should avoid credit cards with a 0% APR balance if you have a history of overspending and often carry a credit card balance. The introductory period doesn’t last forever and the regular APR is often higher than regular credit cards. You don’t want to have a high interest credit card if you are struggling to make payments on time.
While a balance transfer to a 0% APR account can be a very useful tool in getting out of debt faster, you want to ensure it is used wisely to maintain good financial health. Make sure that you understand the terms and conditions of the card are using good money management skills before you apply for a 0% APR credit card offer.
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