The common perception regarding credit cards is that they usually make money out of interest paid by people who miss paying their bills in due time, and thus it’s confusing to see the zero interest credit cards. Generally, it means that one doesn’t have to pay any interest on the card’s outstanding balance for an initial period. It’s similar to an interest-free loan that one can get from parents or friends. However, they have more than just interest, and thus it’s important to understand the terms and conditions involved.
Features of zero interest credit cards
Below are the main features to look for when looking for a zero interest credit card:
1. Introductory period
It’s normally the time period you have up to a point where the interest free annual percentage rate runs out. In most cases, the time frame ranges from 3-9 months for buying cards and 6-16 months for the balance transfer cards.
2. Introductory APR
This is the interest amount accrued on your credit card balance for a certain period of time. It simply means that if one qualifies for a zero interest credit card, then he or she will have several months to pay the balance interest free.
3. Ongoing APR
Due to the fact that your introductory rate is simply ‘ introductory ‘, it means that it won’t last forever. However, the ongoing APR is the rate that one is charged after the intro APR ends. You’ll mostly want to look for a low number in this particular column.
4. Default APR
The annual percent rate generally applies to the amount one has on the balance. The default APR is amount chargeable for penalties such as exceeding the maximum allowance or failing to pay the monthly minimum payments. This feature is normally capped by government regulation and is typically much higher than the ongoing APR.
These are just perks which apply to charge the credit card. Some popular rewards include cashback programs, frequent flier miles, and hotel points among others.
6. Transfer fees
Almost all zero interest credit cards have a transfer fee. The fee is normally a percentage of that is transferred. However, the lower the rate, the better. You’ll be looking for 5% on the higher end and 2% on the lower end.
7. Minimum fee
It’s the minimum payment allowed to transfer a balance from one organization to another.
8. Maximum fee
It’s the maximum amount a lender will charge you for the transfer of a zero interest balance.
Pros and cons of zero interest credit cards
– No interest for a set window
One will have to pay zero interest during the introductory period. Majority of the credit cards offer a range from 6-18 months interest free on purchases and sometimes on balance transfers.
– Ideal for huge purchases
In case you want to make a huge purchase, such as a vacation, and you need some time frame to pay it off, then a zero interest credit card is the best option. For a limited time frame, you can carry a balance and space out the repayments which are interest free.
– assists in lowering high interest balances
A person with a high interest credit card debt can transfer it to a card with zero introductory APR on the balance transfers. This provides a window time which doesn’t allow interest accrual on your balance, and thus all payments run towards the debt itself. This will make you reduce your debt at a much higher level.
The zero interest credit cards have some downsides that one should know before applying as follows:
– APR doesn’t last forever
You should enjoy it to the fullest because once the zero percent introductory period ends, it’s over. The zero percent interest will only last for the introductory period, and the card reverts to the regular APR whereby the exact rate is determined by your credit worthiness. In some case, the regular rate may fail to be low and thus one has to be careful not to carry a balance if he or she is nearing the end of the introductory period.
– The balance transfers aren’t always included
Almost every 0% APR offer is made for new purchases that are made with the card. Part of these introductory offers also feature zero percent on balance transfers. However, you need to read the terms well in order to ensure that the balance transfers are eligible for the zero percent rate prior to pulling the trigger.
– A balance transfer fee must still be paid
Even if you get a card with a zero percent introductory offer on the balances, you’ll be required to still pay a balance transfer fee. It’s normally around 3% of the transferred balance and thus if you’re bringing a huge balance, probably it could be significant. Make your calculations and ensure that this works in your favour.
– Bad behaviour can make you lose it
In case you make a late payment, the card issuer has the power to end the introductory period. Moreover, if this happens, some issuers may fail to give you a regular APR and get slapped with a penalty APR that is typically close to 30%.
The types of zero interest credit cards to apply for
Best Customer Service: Discover it
Best Without Balance Transfer Fee: from Chase Slate
Best for Travel Rewards: CapitalOne VentureOne
Best for Grocery Rewards: BlueCash everyday card from the American Express
Best for Students: Bank of America
For detailed information, please see Top 7 Best Zero Interest Credit Cards.
In conclusion, there are numerous introductory credit cards which make it difficult in sorting them and choosing the one suits your needs. It’s vital to choose the offers with low balance transfer fees and long introductory periods where you won’t have to pay any interest at all. You can easily find zero interest credit cards by use of professional online credit card service which has done a lot for you to find the best deals.