Pros and cons of 0% APR
A 0% APR means that you do not have to pay interest on your credit card purchases for a specific period of time. 0% APR credit card offers sound amazing and they are. However, cards with 0 APR still function like regular credit cards.
Advantages of 0% APR credit cards:
- One, to pay off debts with a high-interest rate. When you owe a huge amount of debt on the credit card, interest rates and late payment fee make the paying off of the debt a near impossibility.
If you transfer this balance owed to a card with 0% APR, it will help in rapidly decreasing your debt. Go for cards with 18 months of introductory 0% APR. You will have more time to pay off your debt. You can also increase your credit score thanks to the regular payments. Two, if you are planning on making one massive purchase or several huge purchases within a short period of time. This may include going on a vacation, buying a home appliance, or moving. If you use your regular credit card for these, the interest rates will be high. A card with a 0% APR can help you stretch the balance paid overtime at no interest rate as long as the introductory offer lasts. Three, during the holidays, a 0% APR credit card will lessen your burden. Shopping for gifts and other holiday expenses including entertaining can be taxing when the interest rates come calling. Several 0 APR credit card offers to keep this in mind and come with generous cash rewards and perks during the holiday season. Four, a 0% introductory APR can help speed up payment of student loans, car loans, and home equity amounts. Go for the offer when you are close to paying off the debt and if you are confident you can pay it off. Five, a 0% APR credit card will be a miracle in the event of emergencies like accidents where you want a credit card with a limit big enough to cover the expense but with an interest rate low enough to pay it off quickly.
Drawbacks of 0% APR credit cards:
- One, even if you go for the 0 APR credit card offers, remember, you still have to pay a minimum monthly payment which is generally a small portion of your account balance. If you pay even a day later, your 0% APR offer could be canceled. Thanks to this, you might end up paying higher interests, a higher APR, and late fees. In addition, a missed or delayed payment can affect your FICO score. If possible, set up an auto payment system to pay the minimum amount on time every month.
- Two, not all 0 APR credit card offers are what they sound as. The offer may read 0% APR but the APR could apply only to purchases. It may not cover balance transfers where you might have to pay a separate interest rate, along with a balance transfer fee, if you transfer balance from one card to a 0% APR card; it might not cover cash advances where you will have to pay a high APR for cash advances along with a fee; it might not cover situations where your credit card score drops because of late or no minimum payments, exceeding credit limits, or payments that don’t go through. In fact, in these situations, the APR will rocket sky high.
- Three, no matter the offer you go for, the amount of credit you owe on your card will affect your credit score. 30% of your FICO score is determined by the amount of money you owe. It helps if you use less than 30% of the credit limit on your card to avoid issues in this area. If you make several lavish purchases in a month, make multiple payments to avoid maxing out your credit card and to keep your credit utilization ratio low.
- Four, once the introductory period ends, the 0% APR will convert to a regular APR after which the credit card issuer does not have to remind you to pay off what you owe. If you have a balance on your card after this period, the balance will attract interest. Check out what this interest rate is before you go for the 0 APR credit card offers because most of these cards charge interest rates in double digits after the promotional APR offers end. Also, try to pay off your credit card debts before the introductory 0% APR offer ends.
- Five, the effectiveness of a 0% APR offer is determined by your spending habits. If you are in the habit of paying off your credit card balance promptly every month, 0% APR offers might not that be that attractive, since you don’t pay interest rates anyway. This is effective only if you hope to make several big purchases and need several months to pay the balance off.
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