Mr Credit Card from www.askmrcreditcard.com is going to talk about how to make use of 0% deals that are routinely offered by credit card issuers. You might also want to check out his list of 0% balance transfer credit cards
The 0% introductory offer on balance transfers and purchases is a very common tactic used by credit card issuers to lure new cardholders. Credit card issuers hope that by offering a 0% interest rate, the new cardholders will stick to using the card after the introductory period expires. But rather than looking at this as a marketing ploy, there are ways to make this work to your advantage. We will explore these ways to make use of 0% deals to your advantage.
Transfer High Interest Balances: The most obvious way to take advantage of a 0% interest rate is of course to transfer balances from higher interest rate credit cards. This can save quite a bit in interest payments. This technique will work well for those in credit card debt and are looking for a way to pay it off faster. By combining Dave Ramsey’s snowball method together with temporarily paying 0% interest rates, you can get of out your credit card debt much faster.
0% Interest on Purchases: I am generally against making use of 0% deals for purchases. That is because I always advocate paying your credit card bills in full every month. But sometimes, carry a balance may make sense. For example, if you are starting a new business, you could taking advantage of such deals on a business credit card and get a new computer. You may want to carry a balance simply to build a business credit history (and we assume you have the money to pay it off in full if you choose to).
Earn Rebates and Rewards: As silly as it may seem, some cards reward you for actually doing a balance transfer even though they do not offer any 0% interest rate. For example, if you transfer a balance to the US Airways MasterCard, you will get 10,000 bonus miles! So even if you normally pay your bills in full, transferring a balance to get the bonus miles may actually make sense to folks who play the frequent flier game.
Rules and Guidelines
However, to play this game, you need to follow a few rules and be aware of a few things.
Figure Out What the Rate Will Be: If possible, calculate what your interest rate will be after the introductory period so you can plan accordingly. Either make sure your balance is paid in full by then or decide if it will be cheaper to not take advantage of the 0% interest rate and stay with the current card.
Pay More than the Minimum: This is something that would be beneficial to all credit card users, but especially so if you are using a credit card with a no interest offer. In the end if you still have a balance, at least it will be smaller and not accrue as much interest as if you just paid the minimum payment during the intro offer. The typical minimal payment is between 2% and 4%.
Be Aware of the Rules: Make sure you understand where the 0% interest applies, if it is just on balance transfers or only on certain purchases. Also make sure you are aware of the time period and the exact date the intro offer will be over. If you need to, put the date on a calendar so you won’t be surprised when you have to start paying interest on your credit card.
Pay on Time: Always pay your bills on time (especially when you are on one of these 0% deals. Pay late and you could see your rates go from 0% to perhaps even default rate levels! Sign up for autopay and make sure you have sufficient funds in your bank account.
0% APR Donts
These are things that will sabotage your efforts in taking advantage of a 0% interest rate:
Waiting to Pay Balances: Don’t let the 0% interest rate run out on balance transfers. You could end up paying a higher interest rate after the introductory rate than you were on the card you transferred from. Try to pay off the balance transfer before intro period ends.
Getting into Debt: Don’t use a 0% offer as an opportunity to put yourself further into debt. Make your purchases while the rate is 0% and pay off balances when the introductory period ends.
Summary: – 0% deals offered by credit card issuers can be a great tool in the right hands. You could use it to pay off your credit card debt faster, or manage your cash flows when you get 0% for purchases. Savvy frequent fliers can even earn bonus miles for just temporarily transferring a balance. But the most important thing is to use it wisely and not fall into the trap of getting into debt.
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