Zero-Interest Credit Cards

We all know that we want to find the credit card with the lowest interest rate possible. And we can all do the math and figure out that a zero percent interest rate is as low as its going to get. But what’s the truth behind these zero interest cards? Although these cards can be great for some people in some situations, they aren’t always as perfect as their name makes them sound.

Zero-interest credit cards aren’t cards that have no interest. Well, not exactly anyway. There are two types of zero-interest credit cards. One has zero percent interest for a certain amount of time (the introductory period) after which the rate on the card goes up. The other kind of zero-percent interest card is a card that allows you to transfer balances to it for a lifetime of zero percent interest. The catch there is that any purchases made on the card do have a higher interest rate.

This doesn’t mean that zero-interest credit cards are a scam. In fact, they can be an excellent tool for reducing your credit card debt. But getting a good one requires doing a little bit of research. First, consider why you want this card. Are you getting it because you have some big spending to do and want the cost to stay low? Or are you getting it to transfer a big balance over to the zero percent interest rate? Knowing this will help you decide between the two different cards.

Next, you’ll want to consider the interest rate. Yes, it’s zero percent now. But what will it be when the introductory rate ends? Or what is the interest rate on purchases made on a credit card with a lifetime zero percent balance transfer on it? You don’t want to get trapped into a high rate after you make the switch to a no-interest credit card. Consider not just the zero-interest part but what the interest rate will ultimately end up being.

Finally, consider the length of the zero-interest rate. For cards that are in introductory periods, the rate is going to change. You want to know if that’s going to happen one month from now or one year from now. And you want to consider whether you’re going to pay off the debt before that time is up. If not, a different card with a low-interest offer for an extended period of time could be a better choice.

This aspect won’t apply to the zero-interest balance transfer card if the rate lasts for the lifetime of the alone. But what might apply is a balance transfer fee. Make sure that you know all of the terms and details of the zero interest credit card before you file your application to receive it.

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This entry was posted on Saturday, February 2nd, 2008 at 1:11 am and is filed under Choosing a Credit Card. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.