Although a new 0% credit card offer might be tempting, there are several things you need to look for to ensure that it is the right card for your situation.
Nearly 25 percent of all credit card offers detail an introductory rate of 0%. This rate could last anywhere from a few months to more than a year and could, potentially, save a consumer a lot of money in interests charges. Unfortunately, these cards are not always what they are cracked up to be. That does not necessarily indicate any manipulation or undercutting on behalf of the credit card companies looking solely for profit. In fact, these offers are intended to entice more consumers to opening accounts, but you still need to read all the fine print to make sure that whichever card you apply for is, indeed, the right card for you.
According to a recent survey, in fact the first ever, more no-interest credit cards are being offered to consumers than ever before. Obviously, this is intended to appeal to consumers who generally carry a balance month to month or who want to consolidate their existing credit card balances to a lower rate card. If this sounds like you, though, there are a few things you should keep in mind before opening a new account just to be sure that your strategy is sound.
First of all, before you even think about applying for a new no-interest credit card you should realize that you might not even qualify. Credit card issuers offer these cards to just about everyone in order to produce the most applications but you will need a credit score above 700 to qualify. This doesn’t mean that you will be denied for the card if your score is below that but you may qualify for a better rate than other cards. Still, if you do qualify you will want to be sure that you pay maintain responsibility during the introductory period: one slip up and you could quickly find yourself paying the much higher default rate.
Secondly, sign-up bonuses (which include things like a 0 percent introductory rate) can often trap you by convincing you to use the card recklessly just to gain access to the benefits. If you aren’t prepared to make significant payments to reduce the card balance this behavior could quickly get out of hand.
Third, there are many other credit card features that will matter to you in the long run and you should pay better attention to those if you want to know whether or not a card is right for you. For example, if the default rate of this potentially new card is higher than your existing cards, it might not be a good idea to apply. Similarly, you should consider the annual fee. In addition, if this new card doesn’t offer the kinds of rewards that your existing card gives you it probably won’t be good for you down the road.
Fourth, you need to pay attention to how the low rate applies to balance transfers. If you think you are going to save money by consolidating or transferring balances to a card with a lower rate, you need to make sure that you will be able to pay off the balance before the introductory period ends. Otherwise you will end up reverting to the higher rate, paying much more in the long run. Either that, or you existing balance may be too high and the new issuer won’t allow the transfer.
Finally, simply beware of the fact that extremely low interest rates often result in overspending. These cards are best reserved for responsible consumers who plan to make one large purchase and then pay the balance off before the introductory period ends. If you do not have a plan there is a much higher chance for impulse spending.