Zero Percent Credit Cards
By: Anne Durrell
Lenders know that customers love hearing about zero percent credit cards. Many people pay so much in interest payments already that any chance they have of paying no interest at all is instantly appealing.Unfortunately there are a few catches you should think about before you apply for zero percent credit cards.
Balance Transfers
In most cases, the lenders tend to offer cards with no interest only to transfer the balance of an existing credit card. This means you may need to refinance your current credit card's balance over to the new lender in order to benefit from zero percent credit cards.
Cash Advances
Taking a cash advance out of your zero percent credit card's available limit may see an instant increase in the interest rate you're charging. The zero percent offer may only apply to the balance you transferred, but the fees you pay on any cash advances you might take out could be very high.
Transfer Fees
Paying no interest might be appealing, but what the banks don't tell you is that they often charge hefty transfer fees to shift your old credit card's balance over to your new zero percent credit cards. They add these fees on top of your balance, so now you've increased your level of debt.
Annual Fees
Before you submit your application for zero percent credit cards, always ask if there will be any annual fees charged to your account. If the fees quoted sound too high, negotiate for lower fees or compare them with another lender.
Temporary Discounted Rate
While there really are zero percent credit cards available that won't change the rate for your transferred balance, there are also cards that may only offer the no interest option for a short time. Some may only extend the offer for six months or twelve months.
If you know the interest rate may increase at a point in the future, always try to reduce the balance as much as you can before the rate changes.
When banks transfer the balance of your old credit cards over to the new zero percent credit cards, they don't always close your old account. This means you have a new credit card with no interest, but the transferred amount is at its limit. You also have an old credit card with high interest and no balance owing. The temptation to spend on your old account is very high, so be disciplined about either closing it down or voluntarily reducing the available limit to reduce the risk of increasing your debt further.
Good Credit
You should always check if the lender offering zero percent credit cards wants customers to have a good credit score before you apply. If you can, try to ask the bank's representative what the minimum credit score is that they'll consider. If you know your score is below their required minimum, then spend a little time working on some way to increase your score before applying.
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