You notice an advertisement that says, “Transfer your balance to our credit card and get 0% APR immediately!” Sounds tempting, but is there a catch behind this? It’s unbelievable that credit card companies would give credit away for free without making a profit. Well, you are probably right as you explore the following before you apply for one:
It is only a limited-time offer
This means that you get to enjoy your 0% APR only for a stipulated period, usually between six and twelve months. During this period, all amounts charged to your card will not accumulate in interests. However, once this period is over, the credit card companies are open to charge you at an interest rate that may be higher than usual. In fact, there have been instances where these interest rates have escalated to levels as high as 20%.
How can you benefit from 0% APR?
If you are disciplined enough, you can actually take advantage of your 0% APR benefit. All you need to do is to make arrangements to pay your purchases in monthly installments within the 0% APR period. Therefore, if you transfer your balance of $1000 to your new credit card and break your repayments over a 4-month period, you will only need to pay $250 for the next 4 months – interest-free!
Read the fine print
Credit card companies will usually provide you with a set of terms and conditions in fine print on the usage of your credit cards. Most people don’t read that, and get themselves into a whole lot of debt when they start overspending. If you go through the fine-print, you will find information on your 0% APR period, or whether balance transfers are allowed. There have been cases where 0% APR is only offered to new credit card charges and not for balance transfers. Apart from that, processing charges may be incurred for these transactions, something you should know before you make a decision.
Repay everything before the end of the 0% APR period
Bad budgeting, ignorance and a lack of discipline are some of the things that have gotten many people into credit card debt. Therefore, it is best to pay everything off before the default rate kicks in. Otherwise, you may be end up facing a problem of snowballing debt when the interest charges start to take effect.
Plan well and spend right
Designed for convenience, 0% APR credit cards offer a host of benefits if used in the right way. For one thing, they should not be used to pay for ALL your expenses, but only necessary ones. Additionally, monthly repayments are still applicable even during the 0% APR period. In fact, many credit card companies impose penalty charges for late payments, which will certainly add to your total debt.
Finally, there are both benefits and pitfalls when using credit cards. The trick is good money management and practical usage, a virtue that will make credit cards work to your advantage.