0 APR credit cards certainly have their benefits and advantages. But it is crucial for you to read the fine print. Even though it says 0%, it does not necessarily mean you don’t pay anything. Unless you are able to follow the conditions, you could end up paying a higher interest rate.
What are the Offer Conditions?
The first thing you should know is that most companies charge a fee for balance transfers and cash advances. The application of the 0% must be clear; some companies offer the zero rates for old and new purchases, but some offer it only for new purchases.
Most of the time however, you get the 0% after you register a new account, so old purchases should not be a problem. But if you get the offer from an existing card, the old purchases you made are not covered by the zero interest rate.
Duration of the Offer
The 0% rate is temporary; most last for three months with some good for a year. Rarely do the offers extend for more than 12 months. While some companies offer “no interest, no payment” options, many require customers to pay a minimum amount per month to keep the 0% rate going.
For this reason it is vital that you pay the minimum balance required every month. Failure to do this could result in an interest rate hike.
About 0% on Cash Advances
The cash advance means the card lets you borrow money for a specified rate. Normally this is not a good idea as credit cards impose higher charges than banks. But if you have 0 APR credit cards, you can try it for the duration of the zero interest rate offer.
Assess any fees that may be charged; many have a 3% fee. For example, if you opt for a cash advance of $1,000, the company will impose a $30 fee. In this case, the 0% cash advance will have a 3% interest rate.
This is based on the presumption the 0% rate is valid for 12 months. If the offer is good for six months only, you are in effect paying 6% for the $1,000.
Moreover, you must pay the cash advance before the zero interest rate offer expires. If you fail to do this, the higher interest rate will take effect. Depending on the credit card company, this could end up costing you hundreds of dollars.
About 0% on Balance Transfers
This simply means you are going to move your account from a high interest credit card to one with a zero interest rate. If you are paying hundreds of dollars in interest, this is a good choice.
Keep in mind though, there is a 3% processing fee. You should also reimburse the balance transfer before the 0% offer expires. Otherwise you will end up paying a high interest.
0 APR credit cards are useful for those struggling with high interest cards. While it has its benefits including cash advances, it pays to know the potential pitfalls too so financial problems can be avoided.
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