No Interest Credit Cards
There are many different credit card companies that are offering no interest credit cards, normally on balance transfers. Paying no interest allows you to pay the principal balance of your debt more quickly, as there will be no interest fees involved. While 0% interest sounds like a financially sensible idea for you to participate in, it is very important to understand all of the implications of the card. Often times there are fees and penalties involved that are included in the small print.
Dates can be very important when dealing with balance transfers and no interest credit cards. If you are late with a payment during your 0% interest period, penalties and interest will be added to your bill and the interest free period will be over. Make sure that your payments are paid in plenty of time, and be certain to check your statement each month to make sure all payments have been applied appropriately. Automatic bill payment may be the best answer for you when dealing with online payments. Most credit card companies offer this through their online banking website.
There are often times fees associated with the 0% balance transfers. Depending on the amount of money being transferred, it many not be worth paying the fees if the debt will be repaid soon. The balance transfers fees are generally a percentage of the amount of money transferred, typically 3%. This balance transfer rate may vary among different credit card companies, so this in an important fee to discuss when applying for a balance transfer. There are situations where managers will be able to adjust this fee, if you can find a competing credit card that offers a lower fee.
The majority of credit cards have a special system for how payments are applied. Even though you may have a certain amount of money on the card at 0% interest, your purchasing rate may be much higher. If you make a purchase, the money that you pay towards your bill will pay down the lower interest rate amount first. This means that the amount of purchases is being charged at a higher interest rate monthly and will be the last amounts paid off. It is advisable to avoid purchasing items on the credit cards that you are using as balance transfer facilities, if at all possible.
If you have good credit, and if you are organized about payment dates, you can pay off your debt much more quickly by taking advantage of 0% balance transfer rates. Once you come to the end of your special 0% period, you can open another credit card offering the same 0% rate and transfer the money. It is entirely possible to pay off your debt paying only balance transfer fees. While this is a time consuming effort, it may be well worth it. When considering this option, you should also consider the implications having multiple lines of credit open on your credit report. This could have adverse affect on your credit score.
No interest credit cards are an excellent way to pay down your debt more quickly. Be certain to read the fine print on all deals, understand all of the fees that are applicable, and know the way the payments are restructured.
For further information of what to watch out for and the likely benefits of your choice of credit card, check out our section on Credit Card Pros & Cons