Do credit cards have a positive impact on your finances? It's up to you how you do it. Use this. A 0 percent APR or balance transfer card is a godsend if you make the right move.If not, you may regret signing up for years to come.
Before choosing a credit card in this niche, it is helpful to know the pros and cons you may face. Not only will this inform your decision about which new card to get, but arming you with information will help you avoid making things worse than when you started.
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Advantages of a 0% annual credit card
The main benefit, interest avoidance, is obvious, but other potential benefits are more subtle. Consider these pros before applying for a zero interest credit card.
SAVE MONEY ON INTEREST
This is not surprising, but using a 0% annual credit card can save you a lot of money on interest. This is true anyway, but especially if you're using a traditional credit card, as the average credit card interest rate is over 19%.
How much can you save? Let's say you have a credit card debt of $4,000, an APR of 19%, and you decide to pay $200 per month. In that case, it would take you 24 months to pay off your debt, and you would have paid more than $848 in interest along the way.
If he paid $200 a month at APR 0%, on the other hand, he could be interest free in 20 months and get $0 interest. This assumes that the referral offer is over 20 months old. This is in line with some of the best offers available today, including the BankAmericard® credit card.
Use Bankrate's credit card payment calculator, plug in your balance and interest rate, and see how much you can save with a 0% annual interest card.
Reduce Your Monthly Payment
Moving from a higher rate to 0% APR while saving on interest may also reduce your required monthly credit card payment there is.
Please remember, however, that credit card APRs will be picked up at the regular rate once the referral is complete. End of April period. In other words, low monthly payments may not last long.
Pay off your debt faster
Using a balance transfer credit card to get zero interest on your consolidated debt can help you significantly reduce your debt.
Every cent you pay directly on your debt with no interest added to your monthly bill,
Enjoy perks and perks as you spend
Also note that many credit cards with 0% APR allow you to earn rewards on your purchases. This includes welcome offers and cash back or reward points based on each dollar spent.
Credit cards also come with benefits such as cell phone insurance, purchase protection against damage or theft, extended warranties, and other valuable benefits such as consumer protection.
Improve Your Credit Score
Finally, if you use plastic responsibly, credit cards can help improve your credit score. Scores can be improved due to lower utilization. Making timely payments on your card is the most important factor used to determine your FICO credit score.
Cons of 0% annual interest credit cards
There are many, but one benefit to consider with a 0% p.a. credit card is that using the card the wrong way can cost you money. The main drawbacks of using this type of credit card are:
Late payments can ruin your plans
First, late payments on credit cards with 0% APR can result in lost APR implementation time. It is important to understand that there are This is because late payment usually violates the terms of the referral offer.
A new credit card can temporarily affect your credit score
Applying for a new credit card requires difficult research. On your credit report that can affect your credit score. However, please note that the impact will be temporary and minor. Unless you need to keep your credit in top shape to apply for a loan right away, a small decrease in your score is nothing to worry about.
A balance transfer fee applies to transferred debt.
If you use a 0% annual rate credit card to consolidate and pay off your debt, there is typically a 3-5% balance transfer fee.
Paying this fee may be well worth it for the interest savings, but it's important to understand that balance transfers are rarely free.
The introductory period of APR does not last forever
Interest-free offers are for a limited time, usually he is 6-21 months. After the introductory period ends, the debt starts to build up at the card's normal floating rate.
Also, remember that credit cards usually charge higher interest rates than other financial products such as personal loans and home equity loans. .
Interest-free offers can satisfy you
Last but not least, having debt at 0% p.a. may hold. It's easy to become complacent and pay less each month than you need because you know you're not accruing interest on your purchases, transferred debt, or both.
Credit cards with 0% APR — especially bounties — can even entice you into spending more than you planned.
If it makes sense to get a 0% annual credit card
If you are financially responsible and want to save money with interest for a limited period of time, a 0% interest credit card could benefit your finances. , consider signing up for one of these cards:
- I plan to make large purchases and within the card's introductory period I'm confident I can pay the full amount.
- I'm serious about getting out of debt andpaying off all or most of my balance during the card's introduction period. have plans to
- You are between jobs or have recently faced an unexpected expense
- Don't build up a new balance you can't afford
- I pay my credit card and other bills regularly and it has never been a problem.
APR 0% When not to get a credit card
The following scenario shows how a 0% annual rate card can cause more problems than it's worth:
You'd better skip the 0% annual rate credit card. in any of these scenarios. You may not want to take on any new lines of credit at all until you have at least a financial plan in place.
If you already have credit card debt and need to consolidate it, you may want to consider some alternatives to credit cards. With a personal loan, for example, you can pay a fixed monthly payment at a fixed interest rate and know exactly when you will be debt free from the start. Then you can't easily increase the new bill amount.
Home EquityHe can also take out a loan or own home if he has some equity in the house. Equity Line of Credit (HELOC) for debt consolidation. Both options may offer lower interest rates than traditional credit cards, and the loan is guaranteed by the value of your home.
No matter what decision you make, remember that old debts and new bills won't go away by themselves. A 0% interest credit card can help you save money and buy time, but the rest is up to you.
Conclusion
When used correctly, a 0% annual rate credit card can not only save you hundreds of dollars in interest, but it can help you reach your debt repayment goals faster. is also helpful. There are other benefits as well, such as additional consumer protection and earning rewards. However, these cards have stipulations such as his 0% referral offer being voided in case of late payment and a 3% to his 5% balance transfer fee.
If you are disciplined in how you use it, an entry credit card with 0% APR can be a great tool for your personal finances if you are fully aware of both the pros and cons. there is. If you're interested in applying, review our list of the best 0% interest credit cards on the market today and easily compare your options.